On the Existence of Spatial Monopolices Under Free Entry.

In a model of horizontal product differentiation, we show that local monopolied may exist under free entry when capital is perfectly mobile. In contrast both with the situation of restricted entry and with the zero-profit approach to free entry outcomens of Salop 91979), the unit profit rate of incumbent monopolists is positive and bounded above in equilibrium. The upper bound we find decreases with the size of unserved market areas and with the number of incumbent monopolists.