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Quality, Location and Collusion under Spatial Price Discrimination

Author

Listed:
  • Heywood John S.

    (University of Wisconsin – Milwaukee, Department of Economics, Milwaukee, USA)

  • Wang Zheng

    (Capital University of Economics and Business, International School of Economics and Management, Beijing, China)

Abstract

We present the first demonstration of the influence of a quality rivalry on location choices under spatial price discrimination. The rivalry is shown to generate the socially efficient quality but to push locations inefficiently close together, a result not found under Hotelling pricing. We apply this new equilibrium to the anti-trust policy issue of collusion showing that introducing the quality rivalry reduces the likelihood of collusion.

Suggested Citation

  • Heywood John S. & Wang Zheng, 2021. "Quality, Location and Collusion under Spatial Price Discrimination," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(3), pages 1173-1183, July.
    • Handle: RePEc:bpj:bejeap:v:21:y:2021:i:3:p:1173-1183:n:6
    DOI: 10.1515/bejeap-2020-0201
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    More about this item

    Keywords

    spatial price discrimination; product quality; monopoly regions;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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