Friedman and Thisse (RAND Journal of Economics, 1993) show that spatial agglomeration appears in a standard two-stage location price model if the symmetric firms can collude in prices. We introduce a cost difference between two firms. We show that agglomeration never appears in a collusive equilibrium even when the cost difference between the firms is sufficiently small.
JEL classification numbers: L13, R32, L41
Key words: cost asymmetry, spatial agglomeration, collusion