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Strategic Accessibility Competition

  • E. Bacchiega
  • E. Randon
  • L. Zirulia

We analyze the effect of competition in market-accessibility enhancement among quality-differentiated firms. Firms are located in regions with different ex-ante transport costs to reach the final market. We characterize the equilibrium of the two-stage game in which firms first invest to improve market accessibility and then compete in prices. Efforts in accessibility improvement crucially depend on the interplay between the willingness to pay for the quality premium of the median consumer and the ex-ante difference in accessibility between regions. From the social standpoint, all the accessibility investment should be carried out by the high-quality firm. Finally quality choice is endogenized.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 696.

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Date of creation: Mar 2010
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Handle: RePEc:bol:bodewp:696
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  1. Richard Baldwin & James Harrigan, 2007. "Zeros, Quality and Space: Trade Theory and Trade Evidence," NBER Working Papers 13214, National Bureau of Economic Research, Inc.
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  7. Bouckaert, Jan, 2000. "Monopolistic competition with a mail order business," Economics Letters, Elsevier, vol. 66(3), pages 303-310, March.
  8. Colombo, Luca & Lambertini, Luca & Mantovani, Andrea, 2009. "Endogenous transportation technology in a Cournot differential game with intraindustry trade," Japan and the World Economy, Elsevier, vol. 21(2), pages 133-139, March.
  9. GABSZEWICZ, Jean & TURRINI, Alessandro, 1997. "Workers’ skills, product quality and industry equilibrium," CORE Discussion Papers 1997055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  19. repec:ebl:ecbull:v:12:y:2007:i:31:p:1-8 is not listed on IDEAS
  20. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
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  24. K. Sridhar Moorthy, 1988. "Product and Price Competition in a Duopoly," Marketing Science, INFORMS, vol. 7(2), pages 141-168.
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