Regional restriction, strategic delegation, and welfare
We investigate the effects of restricting locations of firms into Hotelling duopoly models. In the standard location-price models, the equilibrium distance between firms is too large from the viewpoint of consumer welfare. Thus, restricting locations of firms and reducing the distance between firms improve consumer welfare, through lower prices and smaller transportation costs for consumers. We introduce strategic reward contracts into the location-price models. We find that in contrast to the above existing result, restriction of the locations of firms reduces consumer welfare. Restricting locations of the firms reduces transportation costs but increases the prices through the change of strategic commitments by the firms, and it yields a counterintuitive result.
|Date of creation:||Nov 2009|
|Date of revision:|
|Contact details of provider:|| Postal: 6-1 Mihogaoka, Ibaraki, Osaka 567-0047|
Web page: http://www.iser.osaka-u.ac.jp/index-e.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chen, Chin-Sheng & Lai, Fu-Chuan, 2008. "Location choice and optimal zoning under Cournot competition," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 119-126, March.
- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979.
"On Hotelling's "Stability in Competition","
Econometric Society, vol. 47(5), pages 1145-50, September.
- Tabuchi, T. & Thisse, J.-F., .
"Asymetric equilibria in spatial competition,"
CORE Discussion Papers RP
1151, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Chaim Fershtman & Kenneth L Judd, 1984.
"Equilibrium Incentives in Oligopoly,"
642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Lai, Fu-Chuan & Tsai, Jyh-Fa, 2004. "Duopoly locations and optimal zoning in a small open city," Journal of Urban Economics, Elsevier, vol. 55(3), pages 614-626, May.
- Haltiwanger, John & Jarmin, Ron & Krizan, C.J., 2010.
"Mom-and-Pop meet Big-Box: Complements or substitutes?,"
Journal of Urban Economics,
Elsevier, vol. 67(1), pages 116-134, January.
- John Haltiwanger & Ron Jarmin & C. J. Krizan, 2010. "Mom-and-Pop Meet Big Box: Complements or Substitutes?," NBER Chapters, in: Cities and Entrepreneurship National Bureau of Economic Research, Inc.
- John Haltiwanger & Ron Jarmin & C.J. Krizan, 2009. "Mom-and-Pop Meet Big-Box: Complements or Substitutes?," Working Papers 09-34, Center for Economic Studies, U.S. Census Bureau.
- John C. Haltiwanger & Ron S. Jarmin & C. J. Krizan, 2009. "Mom-and-Pop Meet Big-Box: Complements or Substitutes?," NBER Working Papers 15348, National Bureau of Economic Research, Inc.
- Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
- Jansen, Thijs & van Lier, Arie & van Witteloostuijn, Arjen, 2007. "A note on strategic delegation: The market share case," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 531-539, June.
- Lambertini, Luca, 1997. "Unicity of the equilibrium in the unconstrained Hotelling model," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 785-798, November.
- Toshihiro Matsumura & Noriaki Matsushima, 2009. "Cost differentials and mixed strategy equilibria in a Hotelling model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 215-234, March.
When requesting a correction, please mention this item's handle: RePEc:dpr:wpaper:0761. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fumiko Matsumoto)
If references are entirely missing, you can add them using this form.