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Duopoly Prices Under Congested Access

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  • Van Dender, Kurt
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    Abstract

    Consider two firms, at different locations, supplying a homogenous good at constant marginal production cost. Consumers incur travel costs to the firm for each unit purchased, and the travel costs increase with the amount of travel to each firm (congestion). When all traffic and all congestion are generated by travel to a duopolist, both the Nash-Bertrand equilibrium prices and the Nash-Cournot equilibrium prices exceed the sum of the marginal production cost and the marginal external travel cost. However, when the road is shared by travelers to the duopolists’ facilities and travelers in competitive markets, the Nash-Bertrand duopoly price equals the competitive price and the Nash-Cournot price contains a markup.

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    Bibliographic Info

    Paper provided by University of California Transportation Center in its series University of California Transportation Center, Working Papers with number qt7xw8c3fn.

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    Date of creation: 01 Sep 2005
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    Handle: RePEc:cdl:uctcwp:qt7xw8c3fn

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    Related research

    Keywords: Duopoly; oligopoly; imperfect competition; transport; congestion; Social and Behavioral Sciences;

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    Cited by:
    1. Grahn-Voorneveld, Sofia, 2011. "Sharing profit in parallel and serial transport networks," Working papers in Transport Economics 2011:7, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    2. van den Berg, Vincent A.C., 2012. "Auctions for private congestible infrastructures," MPRA Paper 40103, University Library of Munich, Germany.
    3. DE PALMA, André & PROOST, Stef, 2005. "Imperfect competition and congestion in the city," CORE Discussion Papers 2005003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Melendez-Hidalgo, Jose & Rietveld, Piet & Verhoef, Erik, 2007. "On the change in surpluses equivalence: measuring benefits from transport infrastructure investments," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 36, pages 107-140.
    5. Barry Ubbels & Erik Verhoef, 2006. "Governmental Competition in Road Charging and Capacity Choice," Tinbergen Institute Discussion Papers 06-036/3, Tinbergen Institute, revised 10 Sep 2007.
    6. Fay Dunkerley & André de Palma & Stef Proost, 2007. "Spatial asymmetric duopoly with an application to Brussels’ airports," THEMA Working Papers 2007-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    7. De Borger Bruno & Dunkerley Fay & Proost Stef, 2006. "Strategic investment and pricing decisions in a congested transport corridor," Energy, Transport and Environment Working Papers Series ete0602, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
    8. De Borger, Bruno & Van Dender, Kurt, 2006. "Prices, capacities and service levels in a congestible Bertrand duopoly," Journal of Urban Economics, Elsevier, vol. 60(2), pages 264-283, September.
    9. DE BORGER, Bruno & PROOST, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Working Papers 2012014, University of Antwerp, Faculty of Applied Economics.
    10. Vincent A.C. van den Berg, 2012. "Auctions for Private Congestible Infrastructures," Tinbergen Institute Discussion Papers 12-087/VIII, Tinbergen Institute, revised 19 Oct 2012.
    11. Pavlyuk, Dmitry, 2012. "Airport Benchmarking and Spatial Competition: a Critical Review," MPRA Paper 43391, University Library of Munich, Germany.
    12. Ubbels, Barry & Verhoef, Erik T., 2008. "Governmental competition in road charging and capacity choice," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 174-190, March.
    13. van den Berg, Vincent A.C., 2013. "Serial private infrastructures," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 186-202.
    14. de Palma, André & Kilani, Moez & Lindsey, Robin, 2007. "Maintenance, service quality and congestion pricing with competing roads," Transportation Research Part B: Methodological, Elsevier, vol. 41(5), pages 573-591, June.

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