Location in a vertically differentiated industry

Emanuele Bacchiega and Antonio Minniti

No 2005071, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We analyze a model of a vertically differentiated duopoly with two regions. These two locations differ for the market size or for the distribution of the willingness to pay for quality of their consumers. Firms sequentially choose to settle in one region and then simultaneously compete in prices, selling their products both on the local market and on the foreigner one. We show that the decision whether to agglomerate or not crucially depends on the extent of regions' asymmetries, but, counter intuitively, there are parametric configurations in which the model predicts that the leader (the first firm choosing location)settles either in the poorer or in the smaller region, leaving the other one to the follower. Welfare analysis completes the paper.

Keywords: regions; vertical differentiation; oligopoly (search for similar items in EconPapers)
JEL-codes: D43 L13 R12 (search for similar items in EconPapers)
Date: 2005-10
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Related works:
Working Paper: Location in a Vertically Differentiated Industry (2005)
Working Paper: Location in a vertically differentiated industry (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2005071

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