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Spatial Price Discrimination in the Spokes Model

Spatial Price Discrimination in the Spokes Model The spokes model allows to address nonlocalized spatial competition between firms. In a spatial context, firms can price discriminate using location‐contingent pricing. Nonlocalized competition implies that neighboring effects are not relevant to firms. This paper analyzes spatial price discrimination and location choices in the spokes model. Highly asymmetric location patterns are one outcome if the number of firms is sufficiently high: in that case, one firm supplies a generally appealing product whereas others focus on a specific niche. Moreover, multiple equilibria arise for intermediate values of the number of firms. In this case, the location patterns do not always globally minimize the sum of transport costs: asymmetric configurations distribute more efficiently the cost between firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economics & Management Strategy Wiley

Spatial Price Discrimination in the Spokes Model

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References (30)

Publisher
Wiley
Copyright
"Copyright © 2014 Wiley Periodicals, Inc."
ISSN
1058-6407
eISSN
1530-9134
DOI
10.1111/jems.12066
Publisher site
See Article on Publisher Site

Abstract

The spokes model allows to address nonlocalized spatial competition between firms. In a spatial context, firms can price discriminate using location‐contingent pricing. Nonlocalized competition implies that neighboring effects are not relevant to firms. This paper analyzes spatial price discrimination and location choices in the spokes model. Highly asymmetric location patterns are one outcome if the number of firms is sufficiently high: in that case, one firm supplies a generally appealing product whereas others focus on a specific niche. Moreover, multiple equilibria arise for intermediate values of the number of firms. In this case, the location patterns do not always globally minimize the sum of transport costs: asymmetric configurations distribute more efficiently the cost between firms.

Journal

Journal of Economics & Management StrategyWiley

Published: Sep 1, 2014

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