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An upstream monopoly with transport costs

Author

Listed:
  • John S. Heywood

    (University of Wisconsin-Milwaukee)

  • Zheng Wang

    (Capital University of Economics and Business)

Abstract

We analyze equilibrium locations of downstream retailers assuming transport cost from a monopoly input supplier. When the upstream transport costs equal those of retailers, a downstream monopoly may locate efficiently and two downstream firms never locate inefficiently. Even with discriminatory pricing upstream, two downstream firms locate efficiently. When assuming downstream transport costs are greater than upstream costs, routinely inefficient locations reemerge in keeping with previous literature.

Suggested Citation

  • John S. Heywood & Zheng Wang, 2023. "An upstream monopoly with transport costs," Journal of Economics, Springer, vol. 139(2), pages 159-176, July.
    • Handle: RePEc:kap:jeczfn:v:139:y:2023:i:2:d:10.1007_s00712-023-00820-3
    DOI: 10.1007/s00712-023-00820-3
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    References listed on IDEAS

    as
    1. Lederer, Phillip J & Hurter, Arthur P, Jr, 1986. "Competition of Firms: Discriminatory Pricing and Location," Econometrica, Econometric Society, vol. 54(3), pages 623-640, May.
    2. Gupta, Barnali & Heywood, John S. & Pal, Debashis, 1995. "Strategic behavior downstream and the incentive to integrate: A spatial model with delivered pricing," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 327-334, September.
    3. Schöler Klaus, 2001. "Vertikal verbundene Märkte im Raum / Vertical Integration in Spatial Markets," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 221(4), pages 394-403, August.
    4. Carlton, Dennis W, 1983. "A Reexamination of Delivered Pricing Systems," Journal of Law and Economics, University of Chicago Press, vol. 26(1), pages 51-70, April.
    5. Kenneth Fjell & John S. Heywood, 2005. "Can exclusive territories limit strategic location downstream?," Papers in Regional Science, Wiley Blackwell, vol. 84(2), pages 221-237, June.
    6. repec:bla:econom:v:48:y:1981:i:189:p:87-91 is not listed on IDEAS
    7. Hurter, Arthur Jr & Lederer, Phillip J., 1985. "Spatial duopoly with discriminatory pricing," Regional Science and Urban Economics, Elsevier, vol. 15(4), pages 541-553, November.
    8. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
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    11. repec:bla:econom:v:48:y:1981:i:189:p:79-86 is not listed on IDEAS
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Transport costs; Upstream monopoly; Spatial price discrimination;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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