Nash versus consistent equilibrium: A comparative perspective on a mixed duopoly location model of spatial price discrimination with delegation
Nickolas J. Michelacakis
Regional Science and Urban Economics, 2023, vol. 99, issue C
Abstract:
We argue that under the presence of a public firm, discriminatory pricing according to location leads to an efficient consistent equilibrium. We consider a mixed ownership duopoly delegation model with spatial price discrimination and constant, albeit different, marginal production costs. In contrast to what holds true for a private duopoly, we prove that the Nash equilibrium, absent delegation, is both consistent and socially optimal. The consistent equilibrium remains socially optimal regardless of the order in the delegation process. Under Nash conjectures, in most cases, firm owners have a strong incentive to delegate location decisions to managers. In such cases, duopolists locate closer to each other. Nash, compared to consistency of conjectures, leads to lower prices, lower profits, for both firms, and increased surplus for the consumer. The result surprises as it contrasts with respective findings regarding a private duopoly.
Keywords: Mixed duopoly; Delegation; Spatial competition; Consistent conjectures; Nash equilibrium (search for similar items in EconPapers)
JEL-codes: D43 L13 L21 L22 R32 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0166046222000989
Full text for ScienceDirect subscribers only
Related works:
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:regeco:v:99:y:2023:i:c:s0166046222000989
DOI: 10.1016/j.regsciurbeco.2022.103860
Access Statistics for this article
Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou
More articles in Regional Science and Urban Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().