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Strategic accessibility competition

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Author Info

  • Bacchiega, Emanuele
  • Randon, Emanuela
  • Zirulia, Lorenzo

Abstract

We analyze the effect of competition in market-accessibility enhancement among quality-differentiated firms. Firms are located in regions with different ex-ante transport costs to reach the final market. We characterize the equilibrium of the two-stage game in which firms first invest to improve market accessibility and then compete in prices. Efforts in accessibility improvement crucially depend on the interplay between the willingness to pay for the quality premium of the median consumer and the ex-ante difference in accessibility between regions. From the social standpoint, also the accessibility investment depends on such a comparison. Finally, we endogenize quality choice and check the robustness of the result to some natural modifications of our assumptions.

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Bibliographic Info

Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 66 (2012)
Issue (Month): 2 ()
Pages: 195-212

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Handle: RePEc:eee:reecon:v:66:y:2012:i:2:p:195-212

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Web page: http://www.elsevier.com/locate/inca/622941

Related research

Keywords: Accessibility investment; Vertical differentiation; Transport costs;

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References

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