Optimal Zoning in Spatial Differentiation

  • Hamid Hamoudi Universidad Rey Juan Carlos de Madrid
  • Isabel Rodríguez Universidad Rey Juan Carlos de Madrid
  • Marcos Sanz Martín-Bustamante Universidad Rey Juan Carlos de Madrid


This study analyzes optimal zoning policy in a duopolistic spatial competition
framework for both circular and linear spaces. A regulator is introduced in
the third stage of the price-location game through a welfare function to model
zoning preferences from firms and consumers. An equilibrium outcome is then
found for both spatial configurations. When the regulator is inclined to favor
consumers (consumer-oriented) both firms are restricted to locate at one point
to serve the whole market. Nevertheless, when the preferences of the regulator
are biased towards firms (firm-oriented) the zoning area is maximized, with both
firms being located at the market boundaries. The equilibrium outcome confirms
location patterns found in real life situations under a non-neutral regulator.
Keywords Zoning, spatial competition, welfare function, equilibrium results, industrial policy
How to Cite
Hamoudi, H., Rodríguez, I., & Sanz Martín-Bustamante, M. (2017). Optimal Zoning in Spatial Differentiation. Estudios de Economía, 44(1), 33-51. Retrieved from https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/45213/57607