Quality, Location and Collusion under Spatial Price Discrimination

John Heywood and Wang Zheng ()
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Wang Zheng: Capital University of Economics and Business, International School of Economics and Management, Beijing, China

The B.E. Journal of Economic Analysis & Policy, 2021, vol. 21, issue 3, 1173-1183

Abstract: We present the first demonstration of the influence of a quality rivalry on location choices under spatial price discrimination. The rivalry is shown to generate the socially efficient quality but to push locations inefficiently close together, a result not found under Hotelling pricing. We apply this new equilibrium to the anti-trust policy issue of collusion showing that introducing the quality rivalry reduces the likelihood of collusion.

Keywords: spatial price discrimination; product quality; monopoly regions (search for similar items in EconPapers)
JEL-codes: L13 R32 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1515/bejeap-2020-0201

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