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Imperfect competition and congestion in the city


  • DE PALMA, André
  • PROOST, Stef


This paper presents a spatial model to study imperfect competition with congestion. The model is used to examine the price and wage setting of subcenters of a city. Residents live in a city while they shop and work in subcentres. Each subcenter o.ers one di.erentiated product and one di.erentiated workplace. Shopping and commuting from the city to the subcenter requires the use of transport infrastructure that can be congested. We show the existence of a Nash equilibrium in prices and wages and analyse the welfare impacts of congestion charging and infrastructure policies. This paper generalises the literature on imperfect competition with di.erentiated products as well as the literature on congestion pricing with imperfect competition.
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  • DE PALMA, André & PROOST, Stef, 2006. "Imperfect competition and congestion in the city," CORE Discussion Papers RP 1879, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1879 Note: In : Journal of Urban Economics, 60, 185-209, 2006

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    References listed on IDEAS

    1. Anderson, Simon P & de Palma, Andre, 2001. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods Too Low?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 113-135, June.
    2. Alex Anas & Richard Arnott & Kenneth A. Small, 1998. "Urban Spatial Structure," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1426-1464, September.
    3. Victor Ginsburgh & Michiel Keyzer, 2002. "The Structure of Applied General Equilibrium Models," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262571579, July.
    4. Anderson, Simon P. & de Palma, Andre, 1999. "Reverse discrete choice models," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 745-764, November.
    5. Anas, Alex & Kim, Ikki, 1996. "General Equilibrium Models of Polycentric Urban Land Use with Endogenous Congestion and Job Agglomeration," Journal of Urban Economics, Elsevier, vol. 40(2), pages 232-256, September.
    6. Edelson, Noel M, 1971. "Congestion Tolls Under Monopoly," American Economic Review, American Economic Association, vol. 61(5), pages 873-882, December.
    7. Anderson, Simon P & de Palma, Andre & Nesterov, Yurii, 1995. "Oligopolistic Competition and the Optimal Provision of Products," Econometrica, Econometric Society, vol. 63(6), pages 1281-1301, November.
    8. Kurt Van Dender, 2005. "Duopoly prices under congested access," Journal of Regional Science, Wiley Blackwell, vol. 45(2), pages 343-362.
    9. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-179, March.
    10. Van Dender, Kurt, 2005. "Duopoly Prices Under Congested Access," University of California Transportation Center, Working Papers qt7xw8c3fn, University of California Transportation Center.
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    Cited by:

    1. 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.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location


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