Spatial asymmetric duopoly with an application to Brussels' airports
AbstractIn this paper the problem of a city with access to two firms or facilities (shopping malls, airports, commercial districts) selling a differentiated product (shopping, flights) and/or offering a differentiated workplace is studied. Transport connections to one facility are congested. A model is presented for this asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages. A comparative statics analysis is used to illustrate the properties of the equilibrium. A numerical model is then applied to the two Brussels airports. Three stylised policies are implemented to address the congestion problem: expansion of transport capacity; congestion pricing; and a direct subsidy to the uncongested facility. Our results indicate that the degree of intrinsic differentiation between the two firms is crucial in determining the difference in profit and market share. Price and wage differences also depend on trip frequency and consumer preferences for diversity. Congestion pricing is the most effective policy tool but all three options are shown to have attractive attributes.
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Date of creation: Dec 2008
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, 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.
- 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-2009-03-28 (All new papers)
- NEP-COM-2009-03-28 (Industrial Competition)
- NEP-GEO-2009-03-28 (Economic Geography)
- NEP-IND-2009-03-28 (Industrial Organization)
- NEP-MIC-2009-03-28 (Microeconomics)
- NEP-URE-2009-03-28 (Urban & Real Estate Economics)
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