Strategic accessibility competition

Emanuele Bacchiega, Emanuela Randon and Lorenzo Zirulia

Research in Economics, 2012, vol. 66, issue 2, 195-212

Abstract: We analyze the effect of competition in market-accessibility enhancement among quality-differentiated firms. Firms are located in regions with different ex-ante transport costs to reach the final market. We characterize the equilibrium of the two-stage game in which firms first invest to improve market accessibility and then compete in prices. Efforts in accessibility improvement crucially depend on the interplay between the willingness to pay for the quality premium of the median consumer and the ex-ante difference in accessibility between regions. From the social standpoint, also the accessibility investment depends on such a comparison. Finally, we endogenize quality choice and check the robustness of the result to some natural modifications of our assumptions.

Keywords: Accessibility investment; Vertical differentiation; Transport costs (search for similar items in EconPapers)
Date: 2012
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Working Paper: Strategic Accessibility Competition (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:66:y:2012:i:2:p:195-212

DOI: 10.1016/j.rie.2011.12.001

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