IDEAS home Printed from https://ideas.repec.org/a/spr/apjors/v3y2019i3d10.1007_s41685-019-00110-1.html
   My bibliography  Save this article

The impact of transportation asymmetry on the choice of a spatial price policy

Author

Listed:
  • Jen-Te Yao

    (Fu Jen Catholic University)

Abstract

This paper studies the strategic choice of a spatial price policy between mill pricing and uniform-delivered pricing (UDP) under transportation asymmetry. Mill pricing in the model emerges as an equilibrium price policy, but it contains different types of strategic interaction, depending on the level of discrepancy between two firms’ transportation rates. If the transportation rate discrepancy is not too great, then mill pricing is a dominant strategy. When the discrepancy is large enough, mill pricing is viewed as a M-matching strategy, whereby the low-transportation-cost firm prefers matching the rival’s strategy, but the high-transportation-cost firm does not do so. There is no “Prisoner’s Dilemma” like the argument that Thisse and Vives (Am Econ Rev 78(1):122–137, 1988, AER) proposes, and there is no robustness for firms to choose a UDP policy like Kats and Thisse (in: Ohta and Thisse (eds) Does economic space matter? St Martin’s, New York, 1993) do. Our study matches the current trend of technology advancement in transportation.

Suggested Citation

  • Jen-Te Yao, 2019. "The impact of transportation asymmetry on the choice of a spatial price policy," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 793-811, October.
    • Handle: RePEc:spr:apjors:v:3:y:2019:i:3:d:10.1007_s41685-019-00110-1
    DOI: 10.1007/s41685-019-00110-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s41685-019-00110-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s41685-019-00110-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lederer, Phillip J & Hurter, Arthur P, Jr, 1986. "Competition of Firms: Discriminatory Pricing and Location," Econometrica, Econometric Society, vol. 54(3), pages 623-640, May.
    2. Amoz Kats & Jacques-François Thisse, 1993. "Spatial Oligopolies with Uniform Delivered Pricing," Palgrave Macmillan Books, in: Hiroshi Ohta & Jacques-François Thisse (ed.), Does Economic Space Matter?, chapter 14, pages 274-302, Palgrave Macmillan.
    3. Mingxia Zhang & Richard J. Sexton, 2001. "FOB or Uniform Delivered Prices: Strategic Choice and Welfare Effects," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 197-221, June.
    4. Norman, George, 1981. "Uniform Pricing as an Optimal Spatial Pricing Policy," Economica, London School of Economics and Political Science, vol. 48(189), pages 87-91, February.
    5. Schuler, Richard E & Hobbs, Benjamin F, 1982. "Spatial Price Duopoly under Uniform Delivered Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 175-187, September.
    6. Hiroshi Ohta & Jacques-François Thisse (ed.), 1993. "Does Economic Space Matter?," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-22906-2.
    7. Greenhut, M L & Ohta, H, 1972. "Monopoly Output Under Alternative Spatial Pricing Techniques," American Economic Review, American Economic Association, vol. 62(4), pages 705-713, September.
    8. Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521315647.
    9. Holahan, William L, 1975. "The Welfare Effects of Spatial Price Discrimination," American Economic Review, American Economic Association, vol. 65(3), pages 498-503, June.
    10. Osborne, Martin J & Pitchik, Carolyn, 1987. "Equilibrium in Hotelling's Model of Spatial Competition," Econometrica, Econometric Society, vol. 55(4), pages 911-922, July.
    11. William J. Furlong & George A. Slotsve, 1983. ""Will That Be Pickup or Delivery?": An Alternative Spatial Pricing Strategy," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 271-274, Spring.
    12. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 1-26.
    13. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    14. Greenhut, Melvin L, 1981. "Spatial Pricing in the United States, West Germany and Japan," Economica, London School of Economics and Political Science, vol. 48(189), pages 79-86, February.
    15. Anderson, Simon P & de Palma, Andre & Thisse, Jacques-Francois, 1989. "Spatial Price Policies Reconsidered," Journal of Industrial Economics, Wiley Blackwell, vol. 38(1), pages 1-18, September.
    16. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    17. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 27-41.
    18. Iñaki Aguirre & Ana M. Martin, 2001. "On the strategic choice of spatial price policy: the role of the pricing game rules," Economics Bulletin, AccessEcon, vol. 12(2), pages 1-7.
    19. Eber, Nicolas, 1997. "A note on the strategic choice of spatial price discrimination," Economics Letters, Elsevier, vol. 55(3), pages 419-423, September.
    20. Martin J. Beckmann, 1976. "Spatial Price Policies Revisited," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 619-630, Autumn.
    21. Phillip Lederer, 2011. "Competitive Delivered Pricing by Mail-Order and Internet Retailers," Networks and Spatial Economics, Springer, vol. 11(2), pages 315-342, June.
    22. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April.
    23. Hwang, Hong & Mai, Chao-cheng, 1990. "Effects of Spatial Price Discrimination on Output, Welfare, and Location," American Economic Review, American Economic Association, vol. 80(3), pages 567-575, June.
    24. Hobbs, Benjamin F, 1986. "Mill Pricing versus Spatial Price Discrimination under Bertrand and Cournot Spatial Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 35(2), pages 173-191, December.
    25. Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521305525.
    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


    Cited by:

    1. Fu-Chuan Lai, 2019. "Special feature in honor of Shin-Kun Peng," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 757-759, October.
    2. Istiak Ahmad & Fahad Alqurashi & Ehab Abozinadah & Rashid Mehmood, 2022. "Deep Journalism and DeepJournal V1.0: A Data-Driven Deep Learning Approach to Discover Parameters for Transportation," Sustainability, MDPI, vol. 14(9), pages 1-72, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Panagiotou, Dimitrios & Stavrakoudis, Athanassios, 2018. "Free-on-board and uniform delivered pricing strategies in pure and mixed spatial duopolies: The strategic role of cooperatives," The Journal of Economic Asymmetries, Elsevier, vol. 18(C), pages 1-1.
    2. Mingxia Zhang & Richard J. Sexton, 2001. "FOB or Uniform Delivered Prices: Strategic Choice and Welfare Effects," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 197-221, June.
    3. Zhang, Mingxia & Sexton, Richard J., 1999. "Fob Or Uniform Delivered Pricing: Strategic Choice And Welfare Effects," 1999 Annual meeting, August 8-11, Nashville, TN 21667, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Hrachya Kyureghian & Maria Plotnikova & Sudipta Sarangi, 2013. "When Consumers and Firms Share Transportation Costs," Studies in Microeconomics, , vol. 1(1), pages 91-111, June.
    5. Graubner, Marten & Sexton, Richard J., 2021. "Spatial competition in agricultural procurement markets," 2021 Annual Meeting, August 1-3, Austin, Texas 313962, Agricultural and Applied Economics Association.
    6. Hueth, Brent & Taylor, Christopher W., 2013. "Spatial Competition in Agricultural Markets: A Discrete-Choice Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150506, Agricultural and Applied Economics Association.
    7. Debashis Pal, 1994. "Cournot Competition and Spatial Agglomeration," Microeconomics 9402002, University Library of Munich, Germany.
    8. Marten Graubner & Richard J. Sexton, 2023. "More competitive than you think? Pricing and location of processing firms in agricultural markets," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(3), pages 784-808, May.
    9. Lin-Ti Tan & Yan-Shu Lin, 2005. "Spatial Monopoly Pricing in a Stochastic Environment," IEAS Working Paper : academic research 05-A004, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    10. Sudipta Sarangi & Hrachya Kyureghian, 2002. "Transport Cost Sharing," Departmental Working Papers 2002-08, Department of Economics, Louisiana State University.
    11. repec:bla:jregsc:v:44:y:2004:i:3:p:489-515:1 is not listed on IDEAS
    12. Jean-Marc Siroën, 1993. "Marchés contestables, différenciation des produits et discrimination des prix," Revue Économique, Programme National Persée, vol. 44(3), pages 569-592.
    13. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    14. Boyer, Marcel & Laffont, Jean-Jacques & Mahenc, Philippe & Moreaux, Michel, 1995. "Sequential Location Equilibria under Incomplete Information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(2), pages 323-350, July.
    15. Ziying Yang & Félix Muñoz-García, 2018. "Can Banning Spatial Price Discrimination Improve Social Welfare?," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 223-243, June.
    16. Graubner, Marten & Balmann, Alfons & Sexton, Richard J., 2011. "Spatial Pricing and the Location of Processors in Agricultural Markets," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114601, European Association of Agricultural Economists.
    17. Marten Graubner, 2018. "Lost in space? The effect of direct payments on land rental prices," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 45(2), pages 143-171.
    18. Aguirre, Inaki & Paz Espinosa, Maria, 2004. "Product differentiation with consumer arbitrage," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 219-239, February.
    19. Sudipta Sarangi & Hrachya Kyureghian, 2001. "Transport Cost Sharing and Spatial Competition," Departmental Working Papers 2001-03, Department of Economics, Louisiana State University.
    20. Torbenko, A., 2015. "Linear City Models: Overview and Typology," Journal of the New Economic Association, New Economic Association, vol. 25(1), pages 12-38.
    21. Fousekis, Panos, 2011. "Spatial Price Competition Between Cooperatives Under Hotelling – Smithies Conjectures," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 12(2).

    More about this item

    Keywords

    Price policy; Mill pricing; Uniform-delivered pricing;
    All these keywords.

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:apjors:v:3:y:2019:i:3:d:10.1007_s41685-019-00110-1. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.