Production cost heterogeneity in the circular city model. (English) Zbl 1408.91123
Summary: 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 illustrates the effects of production costs on firms’ strategic decisions and profits and on consumer surplus.
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