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Duopoly Prices Under Congested Access

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  • Van Dender, Kurt

Abstract

Consider two firms, at different locations, supplying a homogenous good at constant marginal production cost. Consumers incur travel costs to the firm for each unit purchased, and the travel costs increase with the amount of travel to each firm (congestion). When all traffic and all congestion are generated by travel to a duopolist, both the Nash-Bertrand equilibrium prices and the Nash-Cournot equilibrium prices exceed the sum of the marginal production cost and the marginal external travel cost. However, when the road is shared by travelers to the duopolists’ facilities and travelers in competitive markets, the Nash-Bertrand duopoly price equals the competitive price and the Nash-Cournot price contains a markup.

Suggested Citation

  • Van Dender, Kurt, 2005. "Duopoly Prices Under Congested Access," University of California Transportation Center, Working Papers qt7xw8c3fn, University of California Transportation Center.
  • Handle: RePEc:cdl:uctcwp:qt7xw8c3fn
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    Cited by:

    1. Ubbels, Barry & Verhoef, Erik T., 2008. "Governmental competition in road charging and capacity choice," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 174-190, March.
    2. De Borger, B. & Dunkerley, F. & Proost, S., 2007. "Strategic investment and pricing decisions in a congested transport corridor," Journal of Urban Economics, Elsevier, vol. 62(2), pages 294-316, September.
    3. De Borger, Bruno & Van Dender, Kurt, 2006. "Prices, capacities and service levels in a congestible Bertrand duopoly," Journal of Urban Economics, Elsevier, vol. 60(2), pages 264-283, September.
    4. de Palma, Andre & Proost, Stef, 2006. "Imperfect competition and congestion in the City," Journal of Urban Economics, Elsevier, vol. 60(2), pages 185-209, September.
    5. Basso, Leonardo J. & Zhang, Anming, 2007. "Congestible facility rivalry in vertical structures," Journal of Urban Economics, Elsevier, vol. 61(2), pages 218-237, March.
    6. van den Berg, Vincent A.C., 2013. "Serial private infrastructures," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 186-202.
    7. Fay Dunkerley & Andre de Palma & Stef Proost, 2009. "Spatial Asymmetric Duopoly With An Application To Brussels' Airports," Journal of Regional Science, Wiley Blackwell, vol. 49(3), pages 529-553.
    8. de Palma, André & Kilani, Moez & Lindsey, Robin, 2007. "Maintenance, service quality and congestion pricing with competing roads," Transportation Research Part B: Methodological, Elsevier, vol. 41(5), pages 573-591, June.
    9. Melendez-Hidalgo, Jose & Rietveld, Piet & Verhoef, Erik, 2007. "On the change in surpluses equivalence: measuring benefits from transport infrastructure investments," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 36, pages 107-140.
    10. Pavlyuk, Dmitry, 2012. "Airport Benchmarking and Spatial Competition: a Critical Review," MPRA Paper 43391, University Library of Munich, Germany.
    11. Grahn-Voorneveld, Sofia, 2011. "Sharing profit in parallel and serial transport networks," Working papers in Transport Economics 2011:7, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    12. De Borger, Bruno & Proost, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Economics of Transportation, Elsevier, vol. 1(1), pages 35-48.
    13. van den Berg, Vincent A.C., 2012. "Auctions for private congestible infrastructures," MPRA Paper 40103, University Library of Munich, Germany.
    14. Shao, Jing & Yang, Hangjun & Xing, Xiaoqiang & Yang, Liu, 2016. "E-commerce and traffic congestion: An economic and policy analysis," Transportation Research Part B: Methodological, Elsevier, vol. 83(C), pages 91-103.

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