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Trip Chaining: Who Wins Who Loses?

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Author Info
Andre de Palma () (Université de Cergy-Pontoise, ENPC and Member of Institut Universitaire de France, THEMA, 33)
Dunkerley Fay () (K.U.Leuven-Center for Economic StudiesAuthor-Name: Proost Stef)

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Abstract

In this paper we study how trip chaining affects the pricing and equilibrium number of firms. We use a monopolistic competition model where firms offer differentiated products as well as differentiated jobs to households who are all located at some distance from the firms. Trip chaining means that shopping and commuting can be combined in one trip. The symmetric equilibriums with and without the option of trip chaining are compared. We show analytically that introducing the trip chaining option can, in the short run, only decrease the profit margin of the firms and will increase welfare. The welfare gains are however smaller than the transport cost savings. In the long run, with free entry, the number of firms decreases but welfare with trip chaining possible is still higher than when it is excluded. A numerical illustration gives orders of magnitude of the different effects.

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Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment in its series Energy, Transport and Environment Working Papers Series with number ete0605.

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Length: 28 pages
Date of creation: Mar 2006
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Handle: RePEc:ete:etewps:ete0605

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Web page: http://www.econ.kuleuven.be/ew/academic/energmil
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Related research
Keywords: trip chaining discrete choice model general equilibrium model imperfect competition wage competition

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
R3 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Claycombe, Richard J. & Mahan, Tamara E., 1993. "Spatial aspects of retail market structure beef pricing revisited," International Journal of Industrial Organization, Elsevier, vol. 11(2), pages 283-291, June. [Downloadable!] (restricted)
  2. Raith, Michael, 1996. "Spatial retail markets with commuting consumers," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 447-463, June. [Downloadable!] (restricted)
  3. Eaton, B Curtis & Lipsey, Richard G, 1982. "An Economic Theory of Central Places," Economic Journal, Royal Economic Society, vol. 92(365), pages 56-72, March. [Downloadable!] (restricted)
  4. Arun Kuppam & Ram Pendyala, 2001. "A structural equations analysis of commuters' activity and travel patterns," Transportation, Springer, vol. 28(1), pages 33-54, February. [Downloadable!] (restricted)
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  1. Dunkerley Fay & Andre de Palma & Proost Stef, 2005. "Asymmetric Duopoly in Space - what policies work?," Energy, Transport and Environment Working Papers Series ete0509, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment. [Downloadable!]
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