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Location choice and price discrimination in a duopoly

  • Valletti, Tommaso M.

This paper analyzes the problem of price discrimination in a market where consumers have heterogeneous preferences over both a horizontal parameter (brand) and a vertical one (quality). A model with two firms competing over locations and non-linear contracts is analyzed. Discriminatory contracts are first characterized at each location. It is then shown that locations have a big impact on the firms' discriminatory ability and that equilibrium locations are non-monotonic in consumer types; however firms never locate too far away from the first and third quartiles.

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File URL: http://www.sciencedirect.com/science/article/B6V89-459440B-4/2/e4088a858058e9ac941f7426314b42bf
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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 32 (2002)
Issue (Month): 3 (May)
Pages: 339-358

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Handle: RePEc:eee:regeco:v:32:y:2002:i:3:p:339-358
Contact details of provider: Web page: http://www.elsevier.com/locate/regec

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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 623-40, May.
  2. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
  3. 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.
  4. Spulber, Daniel F, 1981. "Spatial Nonlinear Pricing," American Economic Review, American Economic Association, vol. 71(5), pages 923-33, December.
  5. Stole, Lars A, 1995. "Nonlinear Pricing and Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 529-62, Winter.
  6. Spulber, Daniel F., 1989. "Product variety and competitive discounts," Journal of Economic Theory, Elsevier, vol. 48(2), pages 510-525, August.
  7. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  8. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  9. Valletti, Tommaso M., 2000. "Price discrimination and price dispersion in a duopoly," Research in Economics, Elsevier, vol. 54(4), pages 351-374, December.
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