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Spatial Price Equilibrium In Interdependent Markets: Price And Sales Configurations

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  • Robert Raining
  • Paul Plummer
  • Eric Sheppard

Abstract

ABSTRACT Sheppard et al (1992) introduced a spatial interdependent markets model for a single commodity and derived existence and stability properties of sales and prices at equilibrium under two price adjustment mechanisms and two profit‐seeking scenarios. This paper explores the spatial properties of the sales and price configurations. Equilibrium prices are given two interpretations that relate to two different aspects of inter‐market consumer flows for the purpose of purchasing the commodity. Subsequently the paper describes how sales and prices can be separated into an element reflecting locational advantage which arises from the overlapping of juxtaposed consumer choice sets of different sizes and an element reflecting market interaction which arises because of consumer sensitivity to price differences between sites within their choice set. Configurations of sales and prices are generated explicitly for certain spatial systems. The two profit objectives lead to strikingly different spatial price distributions. Equilibrium prices and sales under both profit objectives appear to be quite closely tied to the prices and sales that are generated by the choice set structure (locational advantage) after smoothing by a local scale spatial operator. The relationships between prices and sales due to locational advantage and prices and sales at equilibrium are analyzed.

Suggested Citation

  • Robert Raining & Paul Plummer & Eric Sheppard, 1996. "Spatial Price Equilibrium In Interdependent Markets: Price And Sales Configurations," Papers in Regional Science, Wiley Blackwell, vol. 75(1), pages 41-64, January.
    • Handle: RePEc:bla:presci:v:75:y:1996:i:1:p:41-64
    DOI: 10.1111/j.1435-5597.1996.tb00653.x
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    Cited by:

    1. Bernd Jost, 2012. "Price Dispersion, Search Costs and Spatial Competition: Evidence from the Austrian Retail Gasoline Market," NEURUS papers neurusp166, NEURUS - Network of European and US Regional and Urban Studies.
    2. P Plummer & R Haining & E Sheppard, 1998. "Spatial Pricing in Interdependent Markets: Testing Assumptions and Modeling Price Variation. A Case Study of Gasoline Retailing in St Cloud, Minnesota," Environment and Planning A, , vol. 30(1), pages 67-84, January.
    3. Paul Plummer & Eric Sheppard & Robert Haining, 2012. "Rationality, Stability, and Endogenous Price Formation in Spatially Interdependent Markets," Environment and Planning A, , vol. 44(3), pages 538-559, March.
    4. Xiaoming Ning & Robert Haining, 2003. "Spatial Pricing in Interdependent Markets: A Case Study of Petrol Retailing in Sheffield," Environment and Planning A, , vol. 35(12), pages 2131-2159, December.

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