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Location choice and price discrimination in a duopoly

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  • Valletti, Tommaso M.

Abstract

This paper analyzes the problem of price discrimination in a market where consumers have heterogeneous preferences over both a horizontal parameter (brand) and a vertical one (quality). A model with two firms competing over locations and non-linear contracts is analyzed. Discriminatory contracts are first characterized at each location. It is then shown that locations have a big impact on the firms' discriminatory ability and that equilibrium locations are non-monotonic in consumer types; however firms never locate too far away from the first and third quartiles.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 32 (2002)
Issue (Month): 3 (May)
Pages: 339-358

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Handle: RePEc:eee:regeco:v:32:y:2002:i:3:p:339-358

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Web page: http://www.elsevier.com/locate/regec

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References

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  1. Spulber, Daniel F., 1989. "Product variety and competitive discounts," Journal of Economic Theory, Elsevier, vol. 48(2), pages 510-525, August.
  2. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  3. Stole, Lars A, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-62, Winter.
  4. HAMILTON, Jonathan & THISSE, Jacques-François, . "Duopoly with spatial and quantity-dependent price discrimination," CORE Discussion Papers RP -998, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  6. Valletti, Tommaso M., 2000. "Price discrimination and price dispersion in a duopoly," Research in Economics, Elsevier, vol. 54(4), pages 351-374, December.
  7. Lederer, Phillip J & Hurter, Arthur P, Jr, 1986. "Competition of Firms: Discriminatory Pricing and Location," Econometrica, Econometric Society, vol. 54(3), pages 623-40, May.
  8. Spulber, Daniel F, 1981. "Spatial Nonlinear Pricing," American Economic Review, American Economic Association, vol. 71(5), pages 923-33, December.
  9. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
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Cited by:
  1. Baye, Irina & Hasnas, Irina, 2014. "Consumer flexibility, data quality and location choice," DICE Discussion Papers 139, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  2. Ricardo Biscaia & Isabel Mota, 2011. "Models of Spatial Competition: A critical review," ERSA conference papers ersa11p1518, European Regional Science Association.
  3. Jorge, Silvia Ferreira & Pires, Cesaltina Pacheco, 2004. "Delivered versus Mill Nonlinear Pricing in Free Entry Markets," FEUNL Working Paper Series wp459, Universidade Nova de Lisboa, Faculdade de Economia.
  4. Jorge, Sí­lvia Ferreira & Pires, Cesaltina Pacheco, 2008. "Delivered versus mill nonlinear pricing with endogenous market structure," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 829-845, May.
  5. Duarte Brito & Pedro Pereira, 2007. "Product Differentiation when Competing with the Suppliers of Bottleneck Inputs," Working Papers 25, Portuguese Competition Authority.

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