Locating vendors in Stackelberg competition in a linear monocentric city

The duopoly model of vendors in a linear open city is developed in order to analyze the equilibrium location of vendors in Stackelberg competition. It is shown that the equilibrium vendors´ location is either clustered or dispersed? in the city depending on the relative sizes of shopping cost and commuting cost. It is furthermore shown that the equilibrium vendor location is socially inefficient. Two different types of location regulations are introduced and their effects are investigated. It is especially demonstrated that the location regulation against a vendor entering the city can improve city welfare.