UNIFORM SPATIAL PRICING | Zendy

Lederer Phillip J. | Zendy

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UNIFORM SPATIAL PRICING

Author(s) -

Lederer Phillip J.

Publication year - 2012

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.1467-9787.2012.00771.x

Subject(s) - profit (economics) , microeconomics , order (exchange) , price elasticity of demand , industrial organization , mill , business , pricing strategies , variable pricing , product (mathematics) , economics , finance , mechanical engineering , geometry , mathematics , engineering

Uniform spatial pricing means that a firm delivers its product to any customer at a fixed price, independent of location. Economic theory explains the use of uniform pricing by the added profit generated by absorbing freight charges of distant customers. I extend this insight by demonstrating that when demand elasticity and transportation cost are positively enough correlated, uniform pricing generates higher profits than mill pricing. I show that this result can better explain observed patterns of price policy choice by mail order and web firms. A second result is application of this idea to firms with many shipping facilities.

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