Spatial asymmetric duopoly with an application to Brussels’ airports
AbstractWe study the problem of a city with access to two firms or subcentres (restaurants, airports) selling a differentiated product and/or offering a differentiated workplace. The first subcentre is easily congested (near city centre, access by road), the second less prone to congestion but further away. Both need to attract customers and employees and need to make profits to cover their fixed costs. This is an asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages. This solution involves excessive congestion for the nearby subcentre. Three stylised policies are studied to address this congestion. The first policy is to widen the congested road to the nearby subcentre. The second policy option is to add congestion pricing (or parking pricing etc.) for the congested subcentre. The third policy is to provide a direct subsidy to the remote subcentre so that it can reduce its price. We illustrate the theory using a numerical model applied to the two Brussels airports.
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Bibliographic InfoPaper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2007-14.
Date of creation: 2007
Date of revision:
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duopoly; imperfect competition; congestion; general equilibrium; airport competition;
Other versions of this item:
- Fay Dunkerley & Andre de Palma & Stef Proost, 2009. "Spatial Asymmetric Duopoly With An Application To Brussels' Airports," Journal of Regional Science, Wiley Blackwell, vol. 49(3), pages 529-553.
- Fay Dunkerley & André De Palma & Stef Proost, 2008. "Spatial asymmetric duopoly with an application to Brussels' airports," Working Papers hal-00348443, HAL.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-19 (All new papers)
- NEP-COM-2007-05-19 (Industrial Competition)
- NEP-GEO-2007-05-19 (Economic Geography)
- NEP-IND-2007-05-19 (Industrial Organization)
- NEP-MIC-2007-05-19 (Microeconomics)
- NEP-URE-2007-05-19 (Urban & Real Estate Economics)
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