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A public firm challenged by entry: duplication or diversity?

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  • Nilssen, Tore
  • Sorgard, Lars

Abstract

Should a public firm locate close to or far away from a private firm, i.e., is duplication or diversity the optimum policy? We extend the classical Hotelling location game with exogenously fixed prices to the case where consumers' transportation costs are asymmetric, in the sense that it is more costly for a consumer to move in one direction, say to the left (towards 0), than to move to the right (toward 1). First, we consider the case of two private firms. We find a condition for the existence of a pure-strategy equilibrium. We also explore the outcome of a game of sequential entry. Finally, we consider the case of sequential entry when the first mover is a welfare maximiser, in order to account for the presence of a publicly owned incumbent. It is found that both duplication and diversity may be the optimum policy. We discuss the relevance of this analysis for the recent experience in Norway and Denmark with respect to liberalization of TV transmission.
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Suggested Citation

  • Nilssen, Tore & Sorgard, Lars, 2002. "A public firm challenged by entry: duplication or diversity?," Regional Science and Urban Economics, Elsevier, vol. 32(2), pages 259-274, March.
  • Handle: RePEc:eee:regeco:v:32:y:2002:i:2:p:259-274
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    References listed on IDEAS

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    1. Anderson, Simon P. & de Palma, Andre & Thisse, Jacques-Francois, 1997. "Privatization and efficiency in a differentiated industry," European Economic Review, Elsevier, pages 1635-1654.
    2. Tore Nilssen & Lars Sørgard, 1998. "Time Schedule and Program Profile: TV News in Norway and Denmark," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(2), pages 209-235, June.
    3. B. Curtis Eaton & Richard G. Lipsey, 1975. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Review of Economic Studies, Oxford University Press, vol. 42(1), pages 27-49.
    4. Nilssen, Tore, 1997. "Sequential location when transportation costs are asymmetric," Economics Letters, Elsevier, vol. 54(2), pages 191-201, February.
    5. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-653, October.
    6. Roger Ware, 1986. "A Model of Public Enterprise with Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 19(4), pages 642-655, November.
    7. Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1991. "Mixed oligopoly with differentiated products," International Journal of Industrial Organization, Elsevier, vol. 9(1), pages 43-53, March.
    8. C. Leigh Anderson, 1992. "Canadian Content Laws and Programming Diversity," Canadian Public Policy, University of Toronto Press, vol. 18(2), pages 166-175, June.
    9. Cancian, Maria & Bills, Angela & Bergstrom, Theodore, 1995. "Hotelling Location Problems with Directional Constraints: An Application to Television News Scheduling," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 121-124, March.
    10. Massimo Motta & Michele Polo, 1997. "Concentration and public policies in the broadcasting industry: the future of television," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 293-334, October.
    11. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-311, April.
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    Citations

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    Cited by:

    1. Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2005. "Advertising on TV: Under- or Overprovision?," Memorandum 15/2005, Oslo University, Department of Economics.
    2. John S. Heywood & Guangliang Ye, 2009. "Mixed Oligopoly, Sequential Entry, And Spatial Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 589-597, July.
    3. Matsushima, Noriaki & Matsumura, Toshihiro, 2006. "Mixed oligopoly, foreign firms, and location choice," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 753-772, November.
    4. Yasuo Sanjo, 2007. "Hotelling's Location Model with Quality Choice in Mixed Duopoly," Economics Bulletin, AccessEcon, vol. 18(2), pages 1-11.
    5. Pedro Pita Barros & Nuno Garoupa, 2002. "An Economic Theory Of Church Strictness," Economic Journal, Royal Economic Society, vol. 112(481), pages 559-576, July.
    6. Kress, Dominik & Pesch, Erwin, 2012. "Sequential competitive location on networks," European Journal of Operational Research, Elsevier, vol. 217(3), pages 483-499.
    7. Takeshi Ebina & Toshihiro Matsumura & Daisuke Shimizu, 2009. "Mixed oligopoly and spatial agglomeration in quasi-linear city," Economics Bulletin, AccessEcon, vol. 29(4), pages 2722-2729.
    8. repec:ebl:ecbull:v:18:y:2007:i:2:p:1-11 is not listed on IDEAS
    9. Ali Dadpay, 2017. "Domestic Policies as Strategic Measures in Multinational Markets," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(1), pages 1-9, January.
    10. Heywood, John S. & Ye, Guangliang, 2009. "Mixed oligopoly and spatial price discrimination with foreign firms," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 592-601, September.
    11. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2007. "Competition for Viewers and Advertisers in a TV Oligopoly," Journal of Media Economics, Taylor & Francis Journals, vol. 20(3), pages 211-233.
    12. Hikaru Ogawa & Yasuo Sanjo, 2011. "Market integration and location choice: a mixed oligopoly approach," Letters in Spatial and Resource Sciences, Springer, vol. 4(3), pages 157-166, October.

    More about this item

    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • 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
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

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