JOURNAL OF URBAN ECONOMICS 26, 84-89 (1989) Spatial Competition with Free Entry, Chamberlinian Tangencies, and Social Efficiency: A Reevaluation * BRUCE L. BENSON Department of Economics, Florida State University, Tallahassee, Florida 32306 AND ‘~IOMAS F. COSIMANO Department of Finance and Business Economics, University of Notre Dame, Notre Dame, Indiana 44556 Received October 12,1984; revised September 15,1988 Belenky [1] is correct in pointing out that certain derivations presented in Benson [3] are incorrect. That does not mean that the implications of [3] are incorrect, however. The intention of [3] was to characterize the long-run zero profit equilibrium in Liischian spatial competition. Unfortunately the derivation of that characterization involved an analytical short cut and some intuitive discussion which were misleading and indeed invalid. Belenky accurately points out that the results claimed in [3] are not derived therein. Thus, the purpose of the following presentation is to correct that derivation by explicitly characterizing the long-run equilibrium rather than describing a movement to that equilibrium. The key to the Benson [3] analysis is (24)-hereafter all equations from [3] will be labeled as in Belenky, with a B preceding the equation number, e.g., (B24). This equation, which says that price equals long-run marginal cost in a Liischian equilibrium, is incorrectly derived through (B22), depict- ing the movement from one long-run equilibrium to another. Belenky notes that such a movement requires an additional term 6’(Nv)/6e # 0 (see Belenky’s (5) or Benson [2] for correction of a similar model). Belenky thus contends that (aN~/aPm)(dPm/de) + (aZV~/aN)/(dhr/de) must bal- ance off the a( Nr)/ae # 0, and that the analysis involving (B24) does not follow. However, (B24) does characterize the long-run equilibrium, even though it does not hold for a movement to that equilibrium. *We thank M. L. Greenhut for helpful comments and suggestions. 84 0094-1190/89 $3.00 Copyri&t 0 1989 by Academic Press. Inc. All rights of reproduction in any fom reserved.