We derive the closed-form solution that characterizes the equilibrium in the circular city model, when competing firms have heterogeneous production costs. Tractability issues in this setting are well-known and have not been resolved in prior work. In this paper, the equilibrium solution...

Transaction cost theory has largely considered specific investments as exogenous, leading to calls for studying them as endogenous decisions. We examine firms' specific investment decisions through a game-theoretic model of bilateral, sequential decisions in an extant franchisor-franchisee...