Cournot Competition Yields Spatial Avoiding Competition in Groups

This paper characterizes the properties of equilibrium location patterns in an Anderson-Neven-Pal model and uses these characteristics to comprehensively find the subgame perfect Nash equilibria, most of which are not yet found in the literature. Since the external competition effect may be exactly canceled out, or internal competition strictly dominates external competition, or the internal competition effect is consistent with the external competition effect, therefore without any externality and prior collusion, a competitive group structure may form endogenously in equilibrium and firms tend to avoid competition inside each group. The analyses of an Anderson-Neven-Pal model are instructive in studying the conditions for a capacity to implement a “Nash combination.”