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Strategic accessibility competition

Author

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  • Bacchiega, Emanuele
  • Randon, Emanuela
  • Zirulia, Lorenzo

Abstract

We analyze the effect of competition in market-accessibility enhancement among quality-differentiated firms. Firms are located in regions with different ex-ante transport costs to reach the final market. We characterize the equilibrium of the two-stage game in which firms first invest to improve market accessibility and then compete in prices. Efforts in accessibility improvement crucially depend on the interplay between the willingness to pay for the quality premium of the median consumer and the ex-ante difference in accessibility between regions. From the social standpoint, also the accessibility investment depends on such a comparison. Finally, we endogenize quality choice and check the robustness of the result to some natural modifications of our assumptions.

Suggested Citation

  • Bacchiega, Emanuele & Randon, Emanuela & Zirulia, Lorenzo, 2012. "Strategic accessibility competition," Research in Economics, Elsevier, vol. 66(2), pages 195-212.
  • Handle: RePEc:eee:reecon:v:66:y:2012:i:2:p:195-212 DOI: 10.1016/j.rie.2011.12.001
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    More about this item

    Keywords

    Accessibility investment; Vertical differentiation; Transport costs;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General

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