An experiment on spatial price competition

Henrik Orzen and Martin Sefton

International Journal of Industrial Organization, 2008, vol. 26, issue 3, 716-729

Abstract: This paper investigates price competition in a segmented market. Each segment contains one seller and one consumer, and consumers incur transportation costs when they buy from a seller located in another segment. We consider several competing theoretical solutions to this game and compare the outcomes of a laboratory experiment against these. We find that mixed strategy equilibrium predictions from the analysis of a static model perform better than alternative benchmarks in organizing the data. In particular we observe persistent price dispersion, we find that larger markets are more competitive, and we find that competitive pressures in large markets preclude sellers from exploiting higher consumers' willingness to pay.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167-7187(07)00075-6
Full text for ScienceDirect subscribers only

Related works:
Working Paper: An Experiment on Spatial Price Competition (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:26:y:2008:i:3:p:716-729

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().