A network-city model of spatial competition

In this paper, we analyze a spatial Bertrand oligopoly model called network-city model. Firms compete directly and simultaneously with all other firms. In the model, we allow for heterogeneous product differentiation, heterogeneous constant marginal costs of production, and heterogeneous consumer densities. We show that the equilibrium is unique and easily computable. Our model is more general than the existing spatial models, and more importantly, our model provides a spatial microfoundation for the traditional linear demand functions in a differentiated Bertrand oligopoly.