Abstract
This paper analyzes spatial Cournot competition in a circular city with a directional delivery constraint, which means that a firm can only deliver its product in one direction. It reveals that, contrary to the standard result, the unique location equilibrium involves duopoly firms agglomerating at the same location when they deliver products in different directions or when the direction decisions are made endogenously. We point out that spatial agglomeration emerges from a central point of view for a firm in a circular city, showing relaxing quantity competition through cost differentiation.
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