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Spatial competition à la Cournot: price discrimination by quantity-setting oligopolists

Author: Neven, Damien J. ; Anderson, Simon P.INSEAD Area: Economics and Political ScienceIn: Journal of Regional Science, vol. 30, no. 1, 1990 Language: EnglishDescription: p. 1-14.Type of document: INSEAD ArticleNote: Please ask the Library for this articleAbstract: This paper consider oligopolistic competition in a spatial model when firms take care of goods' delivery and discriminate among consumers. Firms compete by setting quantity schedules independently over space. It is shown that under general conditions a Nash equilibrium in this game exists and is unique. In equilibrium, firms' markets overlap, a feature which accords with intuition and empirical observations. Over the interval between two firms, the equilibrium spatial price schedule is quasi-concave (quasi-convex) when transport costs are concave (convex). With linear transport costs, the model predicts uniform delivered pricing. Uniform pricing could moreover be obtained by a combination of increasing returns to volume in transportation together with concavity of unit transport costs in distance
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This paper consider oligopolistic competition in a spatial model when firms take care of goods' delivery and discriminate among consumers. Firms compete by setting quantity schedules independently over space. It is shown that under general conditions a Nash equilibrium in this game exists and is unique. In equilibrium, firms' markets overlap, a feature which accords with intuition and empirical observations. Over the interval between two firms, the equilibrium spatial price schedule is quasi-concave (quasi-convex) when transport costs are concave (convex). With linear transport costs, the model predicts uniform delivered pricing. Uniform pricing could moreover be obtained by a combination of increasing returns to volume in transportation together with concavity of unit transport costs in distance

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