Spatial Price Discrimination in the Spokes Model

Carlo Reggiani

Journal of Economics & Management Strategy, 2014, vol. 23, issue 3, 628-649

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.

Date: 2014
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https://doi.org/10.1111/jems.12066

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Working Paper: Spatial price discrimination in the spokes model (2012)
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