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A Tale of Two Ports

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  • Ngo Van Long
  • Kar-yiu Wong

Abstract

This paper examines how two geographically separated ports compete for a market consisting of manufacturing firms located between the two ports. There is a firm in each port, and these two firms, taking the infrastructure provided by their governments as given, compete in a Bertrand sense. The governments, however, can also compete in terms of investment in infrastructure. This paper shows that there are cases in which both the firm and the government in the port that has a longer history in the market may have the first mover advantage. In particular, the government can provide a credible threat by overinvesting in infrastructure. Nous analysons un jeu entre deux ports, dont le premier a l'avantage de prendre sa décision avant son adversaire. Dans chaque port, il y a un cartel qui s'occupe de la distribution des biens produits par des établissements localisés entre les deux ports. Les cartels prennent comme donnée l'infrastructure construite par les gouvernements respectifs qui se font concurrence. On démontre que l'un des deux gouvernements a intérêt à utiliser la stratégie de préemption en investissant très généreusement en infrastructure.

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File URL: http://faculty.washington.edu/karyiu/papers/lwong.pdf
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Bibliographic Info

Paper provided by University of Washington, Department of Economics in its series Working Papers with number 0037.

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Date of creation: Aug 1999
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Handle: RePEc:udb:wpaper:0037

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  1. Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  2. Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP -1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
  4. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  5. Douglass C. North, 1955. "Location Theory and Regional Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 63, pages 243.
  6. Van Long, N. & Soubeyran, A., 1996. "R&D Spillovers and Location Choice Under Cournot Rivalry," G.R.E.Q.A.M. 96a35, Universite Aix-Marseille III.
  7. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
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