Equilibrium Location and Economic Welfare in Delivered Pricing Oligopoly
We investigate the equilibrium location pattern and welfare implication in delivered pricing model (or spatial price discrimination model) with a linear city. First, we extend a delivered pricing duopoly with Bertrand competition of Hamilton et al. (1989) to an n-firm model and explicitly solve the equilibrium location pattern. Next, we investigate welfare implication of the equilibrium location pattern. Given the Bertrand competition in the second stage we consider the welfare effect of relocations from the equilibrium locations. The equilibrium distance between firms is smaller than in the first best case, while it is too large from the second best viewpoint.
Volume (Year): 29 (2009)
Issue (Month): 2 ()
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- Hamilton, Jonathan H. & Thisse, Jacques-Francois & Weskamp, Anita, 1989. "Spatial discrimination : Bertrand vs. Cournot in a model of location choice," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 87-102, February.
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- repec:ebl:ecbull:v:18:y:2003:i:1:p:1-9 is not listed on IDEAS
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- Norman, George, 1981. "Spatial Competition and Spatial Price Discrimination," Review of Economic Studies, Wiley Blackwell, vol. 48(1), pages 97-111, January.
- Lederer, Phillip J & Hurter, Arthur P, Jr, 1986. "Competition of Firms: Discriminatory Pricing and Location," Econometrica, Econometric Society, vol. 54(3), pages 623-40, May.
- Toshihiro Matsumura & Takao Ohkawa & Daisuke Shimizu, 2005. "Partial Agglomeration or Dispersion in Spatial Cournot Competition," Southern Economic Journal, Southern Economic Association, vol. 72(1), pages 224–235, July.
- Tabuchi, Takatoshi & Thisse, Jacques-Francois, 1995. "Asymmetric equilibria in spatial competition," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 213-227.
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