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To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.0307-3378.2007.00259.x Byline: Helge Sanner (*) Keywords: consumer welfare; spatial competition vs monopoly Abstract: ABSTRACT If we take into account the spatial dimension of markets, prices of incumbent firms may be higher and consumer surplus may be lower with competition than with monopoly. This result obtains unambiguously, even in the supposedly highly competitive case of Bertrand competition. Moreover, we are able to show that consumers of the commodity may be worse off with duopoly, if the distance between the firms' sites is sufficiently large. Author Affiliation: (*)Department of Economics and Social Sciences, University of Potsdam, Germany Article note: Correspondence: University of Potsdam, Department of Economics and Social Sciences, August-Bebel-Stra[sz]e 89, 14482 Potsdam, Germany. Tel: +49.331.977-4636; Email: sanner@rz.uni-potsdam.de

An analysis of the effects of price discrimination in two-dimensional markets reveals that each firm gains a monopolistic area in the center of the market that has the same shape as the entire market but with a distorted separating line depending on its extension. The study shows that firms that can apply price discrimination could not always make higher profits that firms that cannot apply the same techniques.