Anticipating the long-term ideology of a policymaker

Vitor Miguel Ribeiro ()
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Vitor Miguel Ribeiro: Vitor Miguel Ribeiro - FEP - Vitor Miguel de Sousa Ribeiro

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: We consider a duopoly with horizontally differentiated firms, where firms decide the long-term plans (locations) in addition to short-term issues (prices). As in Bárcena-Ruiz and Casado-Izaga (2014), we introduce a third entity in the city by considering the presence of a policymaker that targets the long-run ideology (location) to the regulated sector. While in Bárcena-Ruiz and Casado-Izaga (2014), the sequential long-run decision between firms occurs after the definition of a long-run orientation by the policymaker, here we consider that one of the firms anticipates the long-term guidance of the policymaker. We find that an anticipatory movement conducted by a firm relatively to the long-run guidance of the policymaker gives to the anticipatory firm control of the majority of the market and the long-term plan of the policymaker is biased to the right of the city center. This result sharp contrasts with Bárcena-Ruiz and Casado-Izaga (2014) where, introducing a sequential move on the long-run decision of firms, the long-term plan of the policymaker is undeviating. Interestingly, we find that the anticipatory movement has null impacts the over equilibrium profits. Finally, the equilibrium social welfare is harmed due to a reduction in the equilibrium consumer surplus.

Keywords: Spatial competition; Long-run decision; Policymaking decision; Price competition. (search for similar items in EconPapers)
JEL-codes: D43 L11 L13 L40 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2014-12
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:553

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