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Heterogeneous duopoly, spatially discriminatory pricing, and optimal location

Author

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  • Wen-Jung Liang
  • Yen-Ju Lin
  • Hong Hwang

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Abstract

It is found in the literature that if duopolists produce differentiated products and engage in price competition in a linear city model with elastic demand, the two firms necessarily agglomerate at the market center and this is the unique locational equilibrium, irrespective of the pricing policies charged by the firms. Utilizing a more reasonable market-serving assumption, this paper finds that the firms can be either centrally agglomerated or dispersed depending on the magnitude of the transport rate and the degree of product differentiation. Moreover, if the two firms choose quantity instead of price as their decision variables, the two firms become less likely to stay apart. But if they do, the distance of their locations necessarily shrinks. This paper also examines the locational configuration in the absence of the market-serving assumption and finds that spatial dispersion could be the only location pattern. Copyright Springer-Verlag 2012

Suggested Citation

  • Wen-Jung Liang & Yen-Ju Lin & Hong Hwang, 2012. "Heterogeneous duopoly, spatially discriminatory pricing, and optimal location," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(3), pages 845-860, December.
  • Handle: RePEc:spr:anresc:v:49:y:2012:i:3:p:845-860
    DOI: 10.1007/s00168-011-0445-5
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Stefano Colombo, 2014. "Fee versus royalty licensing in spatial Cournot competition," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(3), pages 859-879, May.
    2. Wen-Jung Liang & Kuang-Cheng Wang & Hong-Ren Din, 2014. "Spatial Competition and Flexible Manufacturing with Spatially Discriminatory Pricing," ERSA conference papers ersa14p234, European Regional Science Association.
    3. Stefano Colombo, 2016. "Location choices with a non-linear demand function," Papers in Regional Science, Wiley Blackwell, vol. 95, pages 215-226, March.
    4. Stefano Colombo, 2015. "A comment on the locations of firms in Cournot spatial discrimination models," Letters in Spatial and Resource Sciences, Springer, vol. 8(2), pages 119-124, July.
    5. Kuang-Cheng Wang & Hong-Ren Din & Wen-Jung Liang, 2014. "Spatial competition and flexible manufacturing with spatially discriminatory pricing," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 295-314, August.

    More about this item

    Keywords

    R32; L22;

    JEL classification:

    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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