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Spatial Competition, Pricing, And Market Power In Transportation: A Dominant Firm Model

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  • Simon P. Anderson
  • Wesley W. Wilson

Abstract

ABSTRACT Transport firms compete over space. We develop a dominant firm model of transport services wherein one firm (the railroad) has market power, but competes in space with a competitive alternative (truck‐barge). When constrained, the dominant firm prices to “beat the competition”, which impedes efficiency when demand has some elasticity. We extend the basic model in a number of directions that include the relationship between monopoly prices and the generalized concavity of the shipper demand functions, the effects of multiple terminal markets, the role of joint production (fronthaul–backhaul markets), and the effects of capacity constraints.

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  • Simon P. Anderson & Wesley W. Wilson, 2008. "Spatial Competition, Pricing, And Market Power In Transportation: A Dominant Firm Model," Journal of Regional Science, Wiley Blackwell, vol. 48(2), pages 367-397, May.
    • Handle: RePEc:bla:jregsc:v:48:y:2008:i:2:p:367-397
    DOI: 10.1111/j.1467-9787.2008.00556.x
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    2. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    3. Phlips,Louis, 1983. "The Economics of Price Discrimination," Cambridge Books, Cambridge University Press, number 9780521283946.
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    Cited by:

    1. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    2. Anderson, Simon P. & Wilson, Wesley W., 2015. "Market power in transportation: Spatial equilibrium under Bertrand competition," Economics of Transportation, Elsevier, vol. 4(1), pages 7-15.
    3. Behrens, Kristian & Picard, Pierre M., 2011. "Transportation, freight rates, and economic geography," Journal of International Economics, Elsevier, vol. 85(2), pages 280-291.
    4. Phillip J. Lederer, 2020. "Location-Price Competition with Delivered Pricing and Elastic Demand," Networks and Spatial Economics, Springer, vol. 20(2), pages 449-477, June.
    5. Mohammad Tamannaei & Hamid Zarei & Sajede Aminzadegan, 2021. "A Game-Theoretic Approach to the Freight Transportation Pricing Problem in the Presence of Intermodal Service Providers in a Competitive Market," Networks and Spatial Economics, Springer, vol. 21(1), pages 123-173, March.
    6. Francesco Di Comite, 2018. "Transport liberalization and regional imbalances with endogenous freight rates," JRC Research Reports JRC92386, Joint Research Centre.

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