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Spatial Monopoly and Spatial Monopolistic Competition with Two-Part Pricing

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  • Coyte, Peter C
  • Lindsey, C Robin

Abstract

This paper develops a model of spatial price discrimination by two-part pricing when bearing freight and nonlinear pricing are impossible. The two-part tariff comprises a membership fee and a price per visit. When fixed costs per store are low, a monopolist makes membership compulsory and builds stores too close together. With higher fixed cost, the monopolist offers consumers a choice between membership and nonmembership, and builds stores too far apart. Nearby consumers become members, more distant consumers nonmembers. Competition leads to closer spacing than monopoly, and lower welfare except at high levels of fixed cost per store. Copyright 1988 by The London School of Economics and Political Science.

Suggested Citation

  • Coyte, Peter C & Lindsey, C Robin, 1988. "Spatial Monopoly and Spatial Monopolistic Competition with Two-Part Pricing," Economica, London School of Economics and Political Science, vol. 55(220), pages 461-477, November.
  • Handle: RePEc:bla:econom:v:55:y:1988:i:220:p:461-77
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    Cited by:

    1. Jonathan Hamilton & Jacques-François Thisse, 1996. "Nonlinear pricing in spatial oligopoly," Review of Economic Design, Springer;Society for Economic Design, vol. 2(1), pages 379-397, December.
    2. Mark Burkey, 2011. "Spatial pricing models with lumpy transportation costs: the case for travel cost subsidization," Letters in Spatial and Resource Sciences, Springer, vol. 4(3), pages 197-206, October.
    3. Wang, Judith Y.T. & Lindsey, Robin & Yang, Hai, 2011. "Nonlinear pricing on private roads with congestion and toll collection costs," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 9-40, January.
    4. Mark L. Burkey & Alexandra Kurepa, 2016. "Spatial Nonlinear Pricing with Per-Trip versus Per-Unit Transportation Costs," The Review of Regional Studies, Southern Regional Science Association, vol. 46(3), pages 237-255, Winter.
    5. X. Wang & Bill Yang, 2010. "The sunk-cost effect and optimal two-part pricing," Journal of Economics, Springer, vol. 101(2), pages 133-148, October.

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