Abstract: The dissertation provides a detailed study of the location strategy pursued by economic agents in space. The first chapter, "Spatial Pre-Emption by Chain Retailers: An Empirical Investigation," presents an empirical study of the location strategy pursued by multi-store retailers in an urban setting. Data were collected for the 1960-2002 period, on the location of chain supermarkets in the city of Greensboro, NC, and were merged with demographic variables from the Census Bureau. We estimate a discrete choice model where firms choose how many stores to open, their location; and which active stores to exit. We first investigate whether a retailer clusters its stores in space. We find that firms located new stores within proximity to their existing stores for most of the 1960-2002 period. Therefore, we empirically distinguish whether this is an attempt to crowd out the market from the competition (spatial pre-emption) or if cost considerations (spatial scope economies) were the reason. Spatial scope economies were relevant in the 1960-1980 period, but since then have lost importance. This indicates that pre-emptive behavior has increased in importance since 1980. We also test the model for robustness with respect to different geographic definitions of markets, and find that competition was more localized in the earlier half of the data. The second chapter, "Dynamic Spatial Competition Between Multi-Store Firms," proposes a dynamic model of an oligopoly industry characterized by spatial competition between multi-store firms. Firms compete in prices and decide where to open or close stores depending on demand conditions and the number of competitors at different locations. The contribution of the paper is three-fold: first, we provide a dynamic framework to study such oligopoly industries; second, we provide an algorithm to compute the Markov Perfect Equilibria (MPE) of the model; third, we illustrate the model with numerical experiments that analyze the propensity of multi-store retailers to use spatial preemptive behavior. We find that spatial preemptive behavior depends on the level of sunk costs and of consumer transportation costs. The third chapter, "Public Education Provision and the Median Ideal Policy: Evidence from School Quality in Brazil," is based on spatial models of political competition, where political candidates choose their running platforms in the issue space. We study how the provision of public education quality is determined within a politically competitive framework. In particular, we investigate the validity of the median ideal policy theorem by analyzing how public education quality is influenced by the distribution of income in society. Using data from Brazil we analyze the relation between public education policies implemented by elected politicians and the local distribution of income. We then test whether these relationships are consistent with the median ideal policy of the local citizenry by estimating the sensitivity of public education policy to different percentiles of the distribution of income.

In this book a rigorous, systematic, mathematical analysis is presented for oligopoly with multi-product firms in static as well as dynamic frameworks in the light of recent developments in theories of games, oligopoly and industrial organization. The general results derived in this book on oligopoly with multi-product firms contain, as special cases, all previous results on oligopoly with single product as well as oligopoly with product differentiation and single product firms. A constructive nu- merical method is given for finding the Cournot-Nash equilibrium, which may be extremely valuable to those who are interested in numerical analysis of the effects of various industrial policies. A sequential adjustment process is also formulated for finding the equilibrium. Dynamic adjustment processes have two versions, one with a discrete time scale and the other with a continuous time scale. The stability of the equilibrium is thoroughly investigated utilizing powerful mathematical results from the stability and linear algebra literature. The methodology developed for analyzing stability proves to be useful for dynamic analysis of economic models.

We investigate the relationship between competition and innovation using a dynamic oligopoly model that endogenizes both the long-run innovation rate and market structure. We use the model to examine how various determinants of competition, such as product substitutability, entry costs, and innovation spillovers, affect firms' equilibrium strategies for entry, exit, and investment in product quality. We find an inverted-U relationship between product substitutability and innovation: the returns to innovation initially rise for all firms but eventually, as the market approaches a winner-take-all environment, laggards have few profit scraps to fight over and give up pursuit of the leader, knowing he will defend his lead. The increasing portion of the inverted-U reflects changes in firm's investment policy functions, whereas the decreasing portion arises from the industry transiting to states with fewer firms and wider quality gaps. Allowing market structure to be endogenous yields different results compared to extant work that fixes the market structure.

We analyze a general model in which, at each echelon of the supply process, an arbitrary number of firms compete, offering one or multiple products to some or all of the firms at the next or possibly subsequent echelons or directly to the end consumer. At each echelon, the offered products are differentiated and the firms belonging to this echelon engage in price competition. The model assumes a general set of piece-wise linear consumer demand functions for all products (potentially) brought to the consumer market, where each product's demand volume may depend on the retail prices charged for all products; consumers' preferences over the various product/retailer combinations are general and asymmetric. Similarly the cost rates incurred by the firms at the most upstream echelon are general as well. We initially study a two-echelon sequential oligopoly with competing suppliers, each selling multiple products indirectly through a pool of multiple competing retailers or directly to end consumers. In some cases, a supplier may choose to sell some or all of its products simultaneously via its direct sales channel and indirectly via some or all of the retailers. We characterize the equilibrium behavior under linear price-only contracts. In the second stage, given wholesale prices and prices of direct sales channels selected in the first stage, all retailers simultaneously decide on their retail prices to maximize their total profits among all products of all suppliers they choose to do business with. In the first stage, the suppliers anticipate the retailers' responses and all suppliers simultaneously maximize their total pro ts from all channels direct or indirect channels by selecting the wholesale prices and direct sales channel prices. We show that in this two-stage competition model, a subgame perfect Nash equilibrium always exists. Multiple subgame perfect equilibria may arise but, if so, all equilibria are equivalent in the sense of generating unique demands and profits for all firms. We subsequently generalize our results to supply chain models with an arbitrary set of echelons, and show how all equilibrium performance measures can be computed with an efficient recursive scheme. The model may, also be used to evaluate the impact of various structural changes in the supply chain network.

The book has three main objectives. Firstly, to provide an up-dated analysis of the most important theoretical developments, secondly, to present significant empirical verifications and thirdly, to assess the micro-macro debate and the relations which link the market structure to the function of the economic system.