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Intermodal competition and regional inequalities

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  • Combes, Pierre-Philippe
  • Linnemer, Laurent

Abstract

In a model à la Hotelling with discriminatory pricing, we study the impacts of the creation of a new transportation infrastructure that connects two points (as planes or high-speed trains do) and coexists with an old infrastructure that continuously serves space (as roads do). Thus, two transportation modes compete: only road or road plus plane. We characterize the equilibria of a location and price game between two firms. Although airports are symmetrically located, asymmetric equilibria in locations emerge. When the airports are built, relocation of firms induce a decrease of total welfare, if the cost of the transport by plane is not small enough. Regional inequalities appear: in most cases, the welfare of one region decreases when that of the other increases. However consumers’ surplus increases, and firms’ profits decrease. Finally, we study the optimal location and pricing of the new infrastructure.
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Suggested Citation

  • Combes, Pierre-Philippe & Linnemer, Laurent, 2000. "Intermodal competition and regional inequalities," Regional Science and Urban Economics, Elsevier, vol. 30(2), pages 131-184, March.
  • Handle: RePEc:eee:regeco:v:30:y:2000:i:2:p:131-184
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    References listed on IDEAS

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    1. Lederer, Phillip J & Hurter, Arthur P, Jr, 1986. "Competition of Firms: Discriminatory Pricing and Location," Econometrica, Econometric Society, vol. 54(3), pages 623-640, May.
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    4. Hurter, Arthur Jr & Lederer, Phillip J., 1985. "Spatial duopoly with discriminatory pricing," Regional Science and Urban Economics, Elsevier, vol. 15(4), pages 541-553, November.
    5. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    6. Hamilton, Jonathan H. & Thisse, Jacques-Francois, 1992. "Duopoly with spatial and quantity- dependent price discrimination," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 175-185, June.
    7. de Palma, A, et al, 1985. "The Principle of Minimum Differentiation Holds under Sufficient Heterogeneity," Econometrica, Econometric Society, vol. 53(4), pages 767-781, July.
    8. repec:ulb:ulbeco:2013/1759 is not listed on IDEAS
    9. Greenhut, Melvin L, 1981. "Spatial Pricing in the United States, West Germany and Japan," Economica, London School of Economics and Political Science, vol. 48(189), pages 79-86, February.
    10. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
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    Cited by:

    1. Concepción Román, 2008. "Competencia intermodal en el corredor Madrid-Zaragoza-Barcelona ante la introducción del tren de alta velocidad," Economic Reports 11-08, FEDEA.
    2. Tsekeris, Theodore, 2014. "Multi-sectoral interdependencies of regional public infrastructure investments," Socio-Economic Planning Sciences, Elsevier, vol. 48(4), pages 263-272.
    3. Bilotkach, Volodymyr & Fageda, Xavier & Flores-Fillol, Ricardo, 2010. "Scheduled service versus personal transportation: The role of distance," Regional Science and Urban Economics, Elsevier, vol. 40(1), pages 60-72, January.
    4. Hugo Ferreira Braga Tadeu & Jersone Tasso Moreira Silva, 2012. "A Theoretical Framework for the Brazilian Airline Competitive Market Environment," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 97-106, May.
    5. Masahisa Fujita & Jacques-François Thisse, 2003. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Loses from It?," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 121-145.
    6. Baudewyns, 2001. "Urban Public Facility Location, Multipurpose Trips and Spatial Competition: equilibrium and welfare analysis," FEUNL Working Paper Series wp400, Universidade Nova de Lisboa, Faculdade de Economia.
    7. Theodore Tsekeris & Klimis Vogiatzoglou, 2014. "Public infrastructure investments and regional specialization: empirical evidence from Greece," Regional Science Policy & Practice, Wiley Blackwell, vol. 6(3), pages 265-289, August.

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