Spatial asymmetric duopoly with an application to Brussels’ airports

Fay Dunkerley (), André de Palma () and Stef Proost
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Fay Dunkerley: CES – KU Leuven, Belgium

No 2007-14, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: We study the problem of a city with access to two firms or subcentres (restaurants, airports) selling a differentiated product and/or offering a differentiated workplace. The first subcentre is easily congested (near city centre, access by road), the second less prone to congestion but further away. Both need to attract customers and employees and need to make profits to cover their fixed costs. This is an asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages. This solution involves excessive congestion for the nearby subcentre. Three stylised policies are studied to address this congestion. The first policy is to widen the congested road to the nearby subcentre. The second policy option is to add congestion pricing (or parking pricing etc.) for the congested subcentre. The third policy is to provide a direct subsidy to the remote subcentre so that it can reduce its price. We illustrate the theory using a numerical model applied to the two Brussels airports.

Keywords: duopoly; imperfect competition; congestion; general equilibrium; airport competition (search for similar items in EconPapers)
JEL-codes: D43 L13 R13 R41 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-com, nep-geo, nep-ind, nep-mic and nep-ure
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Related works:
Journal Article: SPATIAL ASYMMETRIC DUOPOLY WITH AN APPLICATION TO BRUSSELS' AIRPORTS* (2009)
Working Paper: Spatial asymmetric duopoly with an application to Brussels' airports (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2007-14

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