Additional Transportation Costs benefit Consumer Surplus and Social Welfare in a Bilateral Duopoly

Sangheon Han and Dong Joon Lee

Bulletin of Applied Economics, 2020, vol. 7, issue 2, 119-128

Abstract: This paper examines the location selection by retailers in a bilateral duopoly. We suppose that the location is unconstraint. We compare two cases. One case is that each retailer incurs its transportation costs in order to purchase goods from its manufacturer. Another case is that it does not pay the transportation costs. Our conclusions are two. One is that both retailers locate inside the city, when retailers incur the transportation costs. The other is that consumer surplus and social welfare is larger under retailers’ paying transportation costs than under retailers’ no-paying transportation costs.

Keywords: Unconstraint Location; Consumer Surplus; Social Welfare; Vertical Structure (search for similar items in EconPapers)
JEL-codes: D21 L13 R39 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:rmk:rmkbae:v:7:y:2020:i:2:p:119-128

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