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Spatial asymmetric duopoly with an application to Brussels’ airports

Author

Listed:
  • Fay Dunkerley

    () (CES – KU Leuven, Belgium)

  • André de Palma

    () (THEMA, Univ de Cergy Pontoise, France & ENPC)

  • Stef Proost

    () (CES – KU Leuven, Belgium, CORE, Belgium)

Abstract

We study the problem of a city with access to two firms or subcentres (restaurants, airports) selling a differentiated product and/or offering a differentiated workplace. The first subcentre is easily congested (near city centre, access by road), the second less prone to congestion but further away. Both need to attract customers and employees and need to make profits to cover their fixed costs. This is an asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages. This solution involves excessive congestion for the nearby subcentre. Three stylised policies are studied to address this congestion. The first policy is to widen the congested road to the nearby subcentre. The second policy option is to add congestion pricing (or parking pricing etc.) for the congested subcentre. The third policy is to provide a direct subsidy to the remote subcentre so that it can reduce its price. We illustrate the theory using a numerical model applied to the two Brussels airports.

Suggested Citation

  • Fay Dunkerley & André de Palma & Stef Proost, 2007. "Spatial asymmetric duopoly with an application to Brussels’ airports," THEMA Working Papers 2007-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2007-14
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    References listed on IDEAS

    as
    1. André de Palma & Fay Dunkerley & Stef Proost, 2006. "Imperfect Competition and Congestion in a City with Asymmetric Subcentres," Chapters,in: Spatial Dynamics, Networks and Modelling, chapter 16 Edward Elgar Publishing.
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    Cited by:

    1. Chen, Hsiao-Chi & Liu, Shi-Miin, 2016. "Should ports expand their facilities under congestion and uncertainty?," Transportation Research Part B: Methodological, Elsevier, vol. 85(C), pages 109-131.
    2. de Palma, André & Proost, Stef & van der Loo, Saskia, 2010. "Assessing transport investments - Towards a multi-purpose tool," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 834-849, August.

    More about this item

    Keywords

    duopoly; imperfect competition; congestion; general equilibrium; airport competition;

    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
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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