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Spatial price discrimination and location choice with labor markets

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  • Wen-Chung Guo
  • Fu-Chuan Lai

Abstract

This paper generalizes Hwang and Mai’s (Am Econ Rev 80:567–575, 1990 ) model to include labor markets and shows that their results are still valid when the difference of inverse demand slopes is large enough, while, when this difference is small, a monopoly firm always chooses the same (boundary) location under different pricing scenarios. In the latter situation, total outputs are identical in different pricing scenarios, while the social welfare under discriminatory pricing is definitely less than that of the mill pricing. Our results are robust, no matter whether the commuting costs are paid by the firm or workers, and no matter whether wages are discriminatory or uniform. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Wen-Chung Guo & Fu-Chuan Lai, 2014. "Spatial price discrimination and location choice with labor markets," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 103-119, January.
    • Handle: RePEc:spr:anresc:v:52:y:2014:i:1:p:103-119
    DOI: 10.1007/s00168-013-0576-y
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    References listed on IDEAS

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    1. Stefano Colombo, 2011. "Taxation and predatory prices in a spatial model," Papers in Regional Science, Wiley Blackwell, vol. 90(3), pages 603-612, August.
    2. Liang, Wen-Jung & Hwang, Hong & Mai, Chao-Cheng, 2006. "Spatial discrimination: Bertrand vs. Cournot with asymmetric demands," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 790-802, November.
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    5. Kai Andree, 2013. "Collusion in Spatially Separated Markets with Quantity Competition," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 309-318, September.
    6. Bhaskar, V. & To, Ted, 2003. "Oligopsony and the distribution of wages," European Economic Review, Elsevier, vol. 47(2), pages 371-399, April.
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    Cited by:

    1. Ziying Yang & Félix Muñoz-García, 2018. "Can Banning Spatial Price Discrimination Improve Social Welfare?," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 223-243, June.

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    Keywords

    R30;

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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