An Analysis of the Relationship Between Manufacturer’s Profit and Spatial Economic Structure in the Retail Market

Summary

This chapter first analyzes the relationship between manufacturer’s profit and competitive equilibria in the retail market. The analysis identifies the equilibrium in the retail market that maximizes the manufacturer’s profit, and shows the interesting relationships between the retailer’s price and market size and the manufacturer’s profit in several competitive equilibria. Second, the chapter assumes two different oligopolistic retail markets, and derives the profits of the manufacturer and the retailer in these markets. The profits obtained in each market are compared with those gained by the manufacturer in a competitive retail market. This comparison shows the interesting correspondence between the profits generated in the retail markets with different kinds of competition.