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Additional Transportation Costs benefit Consumer Surplus and Social Welfare in a Bilateral Duopoly

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  • Sangheon Han
  • Dong Joon Lee

Abstract

This paper examines the location selection by retailers in a bilateral duopoly. We suppose that the location is unconstraint. We compare two cases. One case is that each retailer incurs its transportation costs in order to purchase goods from its manufacturer. Another case is that it does not pay the transportation costs. Our conclusions are two. One is that both retailers locate inside the city, when retailers incur the transportation costs. The other is that consumer surplus and social welfare is larger under retailers’ paying transportation costs than under retailers’ no-paying transportation costs.

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  • Sangheon Han & Dong Joon Lee, 2020. "Additional Transportation Costs benefit Consumer Surplus and Social Welfare in a Bilateral Duopoly," Bulletin of Applied Economics, Risk Market Journals, vol. 7(2), pages 119-128.
    • Handle: RePEc:rmk:rmkbae:v:7:y:2020:i:2:p:119-128
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    References listed on IDEAS

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    More about this item

    Keywords

    Unconstraint Location; Consumer Surplus; Social Welfare; Vertical Structure;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other

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