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Spatial Price Policies Reconsidered

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  • Anderson, Simon P
  • de Palma, Andre
  • Thisse, Jacques-Francois

Abstract

The authors provide a comparison of three spatial price policies: uniform pricing, mill pricing, and spatial price discrimination. Profits, consumer surplus, and social surplus are compared in a duopoly model. Until recently, oligopoly analysis has been stalled because of nonexistence of equilibrium. Through the addition of product heterogeneity (using a logit specification), existence can be restored and price policies compared. In contrast to monopoly analysis, consumer surplus is highest under uniform pricing and lowest under mill pricing. Profit and social surplus follow the opposite ranking. Government regulation to encourage mill pricing may therefore benefit firms to the detriment of consumers. Copyright 1989 by Blackwell Publishing Ltd.

Suggested Citation

  • Anderson, Simon P & de Palma, Andre & Thisse, Jacques-Francois, 1989. "Spatial Price Policies Reconsidered," Journal of Industrial Economics, Wiley Blackwell, vol. 38(1), pages 1-18, September.
    • Handle: RePEc:bla:jindec:v:38:y:1989:i:1:p:1-18
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    Cited by:

    1. Boyer, Marcel & Laffont, Jean-Jacques & Mahenc, Philippe & Moreaux, Michel, 1995. "Sequential Location Equilibria under Incomplete Information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(2), pages 323-350, July.
    2. Sudipta Sarangi & Hrachya Kyureghian, 2001. "Transport Cost Sharing and Spatial Competition," Departmental Working Papers 2001-03, Department of Economics, Louisiana State University.
    3. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    4. Ahmadi-Javid, Amir & Amiri, Elahe & Meskar, Mahla, 2018. "A Profit-Maximization Location-Routing-Pricing Problem: A Branch-and-Price Algorithm," European Journal of Operational Research, Elsevier, vol. 271(3), pages 866-881.
    5. Ricardo Biscaia & Isabel Mota, 2013. "Models of spatial competition: A critical review," Papers in Regional Science, Wiley Blackwell, vol. 92(4), pages 851-871, November.
    6. Fousekis, Panos, 2011. "Spatial Price Competition Between Cooperatives Under Hotelling – Smithies Conjectures," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 12(2).
    7. Simon Anderson & Alicia Baik & Nathan Larson, 2023. "Price Discrimination in the Information Age: Prices, Poaching, and Privacy with Personalized Targeted Discounts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(5), pages 2085-2115.
    8. Panagiotou, Dimitrios & Stavrakoudis, Athanassios, 2018. "Free-on-board and uniform delivered pricing strategies in pure and mixed spatial duopolies: The strategic role of cooperatives," The Journal of Economic Asymmetries, Elsevier, vol. 18(C), pages 1-1.
    9. Sudipta Sarangi & Hrachya Kyureghian, 2002. "Transport Cost Sharing," Departmental Working Papers 2002-08, Department of Economics, Louisiana State University.
    10. Mengying Xue & Long He, 2020. "Spatial pricing and product allocation in online retailing," Naval Research Logistics (NRL), John Wiley & Sons, vol. 67(8), pages 670-684, December.
    11. Nathan H. Miller & Matthew Osborne, 2014. "Spatial differentiation and price discrimination in the cement industry: evidence from a structural model," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 221-247, June.
    12. Ziying Yang & Félix Muñoz-García, 2018. "Can Banning Spatial Price Discrimination Improve Social Welfare?," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 223-243, June.
    13. Zhang, Mingxia & Sexton, Richard J., 1999. "Fob Or Uniform Delivered Pricing: Strategic Choice And Welfare Effects," 1999 Annual meeting, August 8-11, Nashville, TN 21667, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Jung, Jinho & Sesmero, Juan Pablo & Balagtas, Joseph V., 2017. "Market Power in Feedstock Procurement and Economic Effects of Corn Ethanol," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258544, Agricultural and Applied Economics Association.
    15. Juan Escobar & Alejandro Jofré, 2010. "Monopolistic competition in electricity networks with resistance losses," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(1), pages 101-121, July.
    16. Alberto Iozzi, 2004. "Spatial duopoly under uniform delivered pricing when firms avoid turning customers away," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 38(3), pages 513-529, September.
    17. Sandra T. Silva & Isabel Mota & Filipe Grilo, 2015. "The use of game theory in regional economics: A quantitative retrospective," Papers in Regional Science, Wiley Blackwell, vol. 94(2), pages 421-441, June.
    18. Jen-Te Yao, 2019. "The impact of transportation asymmetry on the choice of a spatial price policy," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 793-811, October.
    19. Mingxia Zhang & Richard J. Sexton, 2001. "FOB or Uniform Delivered Prices: Strategic Choice and Welfare Effects," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 197-221, June.
    20. Lin-Ti Tan & Yan-Shu Lin, 2005. "Spatial Monopoly Pricing in a Stochastic Environment," IEAS Working Paper : academic research 05-A004, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    21. Jinho Jung & Juan Sesmero & Ralph Siebert, 2020. "Spatial Differentiation and Market Power in Input Procurement: Evidence from a Structural Model of the Corn Market," CESifo Working Paper Series 8088, CESifo.
    22. Heywood, John S. & Luo, Qiming & Ye, Guangliang, 2023. "Spatial price discrimination with a ‘must-have’ component," Regional Science and Urban Economics, Elsevier, vol. 103(C).
    23. Hrachya Kyureghian & Maria Plotnikova & Sudipta Sarangi, 2013. "When Consumers and Firms Share Transportation Costs," Studies in Microeconomics, , vol. 1(1), pages 91-111, June.
    24. repec:bla:jregsc:v:44:y:2004:i:3:p:489-515:1 is not listed on IDEAS

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