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Spatial asymmetric duopoly with an application to Brussels' airports

Author

Listed:
  • Fay Dunkerley

    (CES - KU Leuven - CES - KU Leuven)

  • André De Palma

    (ENS Cachan - École normale supérieure - Cachan, Department of Economics, Ecole Polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

  • Stef Proost

    (CES - KU Leuven - CES - KU Leuven)

Abstract

In this paper the problem of a city with access to two firms or facilities (shopping malls, airports, commercial districts) selling a differentiated product (shopping, flights) and/or offering a differentiated workplace is studied. Transport connections to one facility are congested. A model is presented for this asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages. A comparative statics analysis is used to illustrate the properties of the equilibrium. A numerical model is then applied to the two Brussels airports. Three stylised policies are implemented to address the congestion problem: expansion of transport capacity; congestion pricing; and a direct subsidy to the uncongested facility. Our results indicate that the degree of intrinsic differentiation between the two firms is crucial in determining the difference in profit and market share. Price and wage differences also depend on trip frequency and consumer preferences for diversity. Congestion pricing is the most effective policy tool but all three options are shown to have attractive attributes.

Suggested Citation

  • Fay Dunkerley & André De Palma & Stef Proost, 2008. "Spatial asymmetric duopoly with an application to Brussels' airports," Working Papers hal-00348443, HAL.
  • Handle: RePEc:hal:wpaper:hal-00348443
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00348443
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    References listed on IDEAS

    as
    1. Pels, Eric & Verhoef, Erik T., 2004. "The economics of airport congestion pricing," Journal of Urban Economics, Elsevier, vol. 55(2), pages 257-277, March.
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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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