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Competitive Retailing and Monopolistic Wholesaling in a Spatial Market

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  • Scholer, Klaus

Abstract

This paper discusses the connection between a monopolistic wholesale market and a competitive retail market from a spatial perspective. The resulting model considers two sets of transport costs: (1) those between the wholesaler (or producer) and the retail firms and (2) those between the retailers and the consumers. Irrespective of the density and spatial distribution of the retailers, the wholesaler's profit is twice as large as the aggregate profit made by all retailers. The profit of the producer increases with an increasing number of retailers, whereas the profit of a single retailer decreases. It is concluded that a zero-profit equilibrium in the retailers' market leads to maximum welfare in the entire vertically-related market.

Suggested Citation

  • Scholer, Klaus, 1989. "Competitive Retailing and Monopolistic Wholesaling in a Spatial Market," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 23(1), pages 19-28.
  • Handle: RePEc:spr:anresc:v:23:y:1989:i:1:p:19-28
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    Cited by:

    1. Ishikawa, Toshiharu & Toda, Masao, 2005. "Retail market structure and the threat by the manufacturer to sell goods directly to the consumer," Socio-Economic Planning Sciences, Elsevier, vol. 39(1), pages 43-55, March.
    2. Markus Ksoll, 2001. "Two stages of uniform delivered pricing and a monopolistic network in competitive electricity markets," ERSA conference papers ersa01p280, European Regional Science Association.
    3. Markus Ksoll & Klaus Schöler, 2001. "Alternative Organisation zweistufiger Strommmärkte - Ein räumliches Marktmodell bei zweidimensionaler Verteilung der Nachfrage -," Volkswirtschaftliche Diskussionsbeiträge 47, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.

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