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Location decisions and welfare under spatial price discrimination

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  • Konstantinos Eleftheriou
  • Nickolas J. Michelacakis

Abstract

The welfare effects of regulation are of crucial importance to policy makers. To this end, we present a model of n firms with differentiated costs competing in a linear market within the framework of spatial price discrimination. We prove that the Nash equilibrium locations of firms are always socially optimal irrespective of the number of competitors, the distribution of consumers, firms' cost heterogeneity, the level of privatization, and the number and/or the varieties of the produced goods. We also provide an algorithm on how to find the unique Nash equilibrium in the case of uniformly distributed consumers.

Suggested Citation

  • Konstantinos Eleftheriou & Nickolas J. Michelacakis, 2020. "Location decisions and welfare under spatial price discrimination," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1202-1210, October.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:7:p:1202-1210
    DOI: 10.1002/mde.3166
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    References listed on IDEAS

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    Cited by:

    1. Hang Cao & Leonard F. S. Wang, 2023. "Optimal zoning of managerial duopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 58-67, January.
    2. Heywood, John S. & Wang, Zerong & Ye, Guangliang, 2023. "Spatial price discrimination in a mixed duopoly input market," Regional Science and Urban Economics, Elsevier, vol. 102(C).

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