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This paper studies a spatial model with delivered pricing to examine the relationship between the location of ®rms and their incentives to collude. Since location is an easily observable variable, this information could be of potential use to antitrust regulators. We ®nd that, given demand, a smaller ®rm dispersion is more likely to sustain tacit collusion. That is, the critical discount factor needed to sustain collusion, monotonically decreases as ®rms are located closer together. We also show that as demand increases, it is easier to sustain tacit collusion, given ®rm locations. The above results are in contrast to existing results regarding mill pricing in the context of product differentiation models.

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