Advanced Search
MyIDEAS: Login to save this article or follow this journal

Spatial differentiation, divisible consumption and the pro-competitive effect of income

Contents:

Author Info

  • Lahmandi-Ayed, Rim

Abstract

We analyze a spatial differentiation model with divisible consumption under one-stop shopping. Each consumer who visits only one store, chooses the quantities of the goods which maximize his/her utility function under the budget constraint (namely consumption expenditures must equal income minus transportation costs), choosing the store which provides him/her with the largest indirect utility. We derive the equilibrium price when the firms are located at the two extremities of Hotelling's linear city and show that income increases have a pro-competitive effect. Equilibrium prices are indeed decreasing with consumers' income and increasing with the transportation cost. They converge to marginal costs as income goes to infinity or the transportation cost goes to zero. However the analysis does not amount to a story of weight of transportation cost relative to income. Equilibrium profits do not change in the same way as the transportation cost decreases or the income increases. They do not tend toward the same limit as the income tends to infinity or the transportation cost tends to zero. Finally the one-stop shopping assumption is discussed. It is mainly proved that it may emerge endogenously.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VBY-4WR1B91-1/2/4c5c9b18c4d65863bec53ca954d4ae06
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 46 (2010)
Issue (Month): 1 (January)
Pages: 71-85

as in new window
Handle: RePEc:eee:mateco:v:46:y:2010:i:1:p:71-85

Contact details of provider:
Web page: http://www.elsevier.com/locate/jmateco

Related research

Keywords: Spatial differentiation Divisible consumption Transportation cost Income effect One-stop shopping;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bonnisseau Jean-Marc & Lahmandi-Ayed Rim, 2006. "Vertical Differentiation: Multiproduct Strategy to Face Entry?," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 6(1), pages 1-14, November.
  2. Anderson, Simon P & de Palma, Andre & Nesterov, Yurii, 1995. "Oligopolistic Competition and the Optimal Provision of Products," Econometrica, Econometric Society, Econometric Society, vol. 63(6), pages 1281-1301, November.
  3. Gabszewicz, Jean Jaskold, 1983. "Blue and Red Cars, or Blue Cars Only? A Note on Product Variety," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 50(198), pages 203-06, May.
  4. Acharyya, Rajat, 1998. "Monopoly and product quality: Separating or pooling menu?," Economics Letters, Elsevier, Elsevier, vol. 61(2), pages 187-194, November.
  5. DeGraba, Patrick, 2006. "The loss leader is a turkey: Targeted discounts from multi-product competitors," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(3), pages 613-628, May.
  6. GABSZEWICZ, Jean J. & SHAKED, Avner & SUTTON, John & THISSE, Jacques-François, . "Segmenting the market: the monopolist's optimal product mix," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -707, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Kim, Joo-Han & Kim, Jae-Cheol, 1996. "Quality choice of multiproduct monopolist and spill-over effect," Economics Letters, Elsevier, Elsevier, vol. 52(3), pages 345-352, September.
  8. Bliss, Christopher, 1988. "A Theory of Retail Pricing," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 36(4), pages 375-91, June.
  9. Besanko, David & Perry, Martin K., 1994. "Exclusive dealing in a spatial model of retail competition," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 12(3), pages 297-329, September.
  10. Daniel Hosken & David Reiffen, 2004. "How Retailers Determine Which Products Should Go on Sale: Evidence From Store-Level Data," Journal of Consumer Policy, Springer, Springer, vol. 27(2), pages 141-177, June.
  11. Thill, Jean-Claude, 1992. "Spatial Duopolistic Competition with Multipurpose and Multistop Shopping," The Annals of Regional Science, Springer, Springer, vol. 26(3), pages 287-304, September.
  12. James D. Hess & Eitan Gerstner, 1987. "Loss Leader Pricing and Rain Check Policy," Marketing Science, INFORMS, INFORMS, vol. 6(4), pages 358-374.
  13. Laussel Didier G, 2006. "Are Manufacturers Competing through or with Supermarkets? A Theoretical Investigation," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 6(1), pages 1-18, December.
  14. Choi, Chong Ju & Shin, Hyun Song, 1992. "A Comment on a Model of Vertical Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 40(2), pages 229-31, June.
  15. Champsaur, Paul & Rochet, Jean-Charles, 1989. "Multiproduct Duopolists," Econometrica, Econometric Society, Econometric Society, vol. 57(3), pages 533-57, May.
  16. Klemperer, Paul, 1992. "Equilibrium Product Lines: Competing Head-to-Head May Be Less Competitive," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 740-55, September.
  17. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, Elsevier, vol. 18(2), pages 301-317, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Brandão, António & Correia-da-Silva, João & Pinho, Joana, 2014. "Spatial competition between shopping centers," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 50(C), pages 234-250.
  2. Laussel, Didier & Lahmandi-Ayed, Rim, 2010. "Natural oligopolies with exogenous sunk costs: A non-Suttonian result," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 46(5), pages 844-854, September.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:46:y:2010:i:1:p:71-85. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.