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hello and thank you for using this site to help you. It sounds like an allergy to flea saliva. This does not mean a dog has to be littered with fleas, it can mean a flea has hopped on. bit the dog and hopped off and it will cause a whole reaction which can take months to get over.
That would be the first scenario. The second would be some type of fungal , yeast or bacterial infection affecting the area which can only be determined through a skin scraping at the vet office. Each requires different treatment. One may require oral antibiotics while another would require bathing in a special anti fungal shampoo.
It is best to keep the cone on the dog to prevent any chewing, keep the area clean and wash the area daily with an antibacterial soap. If there is no improvement then you want to have a skin scraping done as you will have an answer before you leave the vet office and treatment can begin.
Here is more on flea allergy dermatitis http://www.petplace.com/article/dogs/diseases-conditions-of-dogs/skin/flea-allergy-dermatitis-in-dogs
If you google flea allergy dermatitis under images you will see pictures of the hair loss on dogs.
Skin scraping and information http://www.petplace.com/article/dogs/diseases-conditions-of-dogs/tests-procedures/skin-scraping-in-dogs