Spatial Pricing with Differentiated Products

George Norman

The Quarterly Journal of Economics, 1983, vol. 98, issue 2, 291-310

Abstract: This paper generalizes analysis of spatial pricing policies to cases in which oligopolists produce differentiated products. It is shown that spatial price discrimination through freight absorption is affected by the number of competitive firms, the extent to which their products are substitutes, and by the locations such firms adopt in the market. It is further shown, however, that spatial price discrimination may be the consequence of collusive agreements, or of attempts to anticipate competitors' actions. The simple (spaceless) foundations of current policies on spatial pricing need to be reexamined, but this reexamination must take into account interconnections between producers, the extent to which their products are differentiated, and their locations.

Date: 1983
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