Location as an instrument for social welfare improvement in a spatial model of Cournot competition

Two-stage models are the main frameworks in the analysis of oligopolistic competition. Literature has discussed some properties of such models when Cournot competition occurs in the second stage and assuming a non-spatial context. It finds that private and social optima are asymmetric. Using spatial behavior with multiple marketplaces, the outcome is different. A social planner can use the location variable as an instrument for reallocating production from, the equilibrium spatial pattern to the optimal outcome while maintaining the symmetry of the model.