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SPATIAL COMPETITION À LA COURNOT: PRICE DISCRIMINATION BY QUANTITY‐SETTING OLIGOPOLISTS *
Author(s) -
Anderson Simon P.,
Neven Damien J.
Publication year - 1990
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.1990.tb00077.x
Subject(s) - economics , microeconomics , bertrand paradox (economics) , cournot competition , oligopoly , nash equilibrium , regular polygon , intuition , bertrand competition , mathematical economics , mathematics , philosophy , geometry , epistemology
In this paper, we 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. We show 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.