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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