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Product differentiation in a linear city and wage bargaining

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  • Thomas Grandner

    () (Department of Economics, Vienna University of Economics & B.A.)

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    Abstract

    Economides (1986) has shown that within a linear city an equilibrium exists in a two-stage location-price game when the curvature of the transportation cost function is sufficiently high. One important point is that not all of these equilibria are at maximal differentiation. In this paper we include an additional stage with decentralized wage bargaining. This intensifies price competition resulting in locations that are nearer to the extremes of the city. The magnitude of this effect depends on the bargaining power of the unions.

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    Bibliographic Info

    Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp109.

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    Date of creation: Sep 2007
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    Handle: RePEc:wiw:wiwwuw:wuwp109

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    Web page: http://www.wu.ac.at/economics/en

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    Cited by:
    1. Gerlinde Fellner & Matthias Sutter, 2008. "Causes, consequences, and cures of myopic loss aversion - An experimental investigation," Department of Economics Working Papers wuwp116, Vienna University of Economics, Department of Economics.
    2. Pasquale Commendatore & Ingrid Kubin & Carmelo Petraglia, 2007. "Footloose capital and productive public services," Department of Economics Working Papers wuwp111, Vienna University of Economics, Department of Economics.
    3. Aleksandra Riedl & Silvia Rocha-Akis, 2007. "Testing the tax competition theory: How elastic are national tax bases in western Europe?," Department of Economics Working Papers wuwp112, Vienna University of Economics, Department of Economics.

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