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SPATIAL COMPETITION, PRICING, AND MARKET POWER IN TRANSPORTATION: A DOMINANT FIRM MODEL *
Author(s) -
Anderson Simon P.,
Wilson Wesley W.
Publication year - 2008
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.1467-9787.2008.00556.x
Subject(s) - market power , industrial organization , price elasticity of demand , monopoly , microeconomics , economics , competition (biology) , truck , cournot competition , barge , business , ecology , physics , marine engineering , engineering , biology , thermodynamics
Transport firms compete over space. We develop a dominant firm model of transport services wherein one firm (the railroad) has market power, but competes in space with a competitive alternative (truck‐barge). When constrained, the dominant firm prices to “beat the competition”, which impedes efficiency when demand has some elasticity. We extend the basic model in a number of directions that include the relationship between monopoly prices and the generalized concavity of the shipper demand functions, the effects of multiple terminal markets, the role of joint production (fronthaul–backhaul markets), and the effects of capacity constraints.