Barnali Gupta

Spatial Cournot competition and agglomeration in a model of location choice

Abstract Consider a two-stage non-cooperative Cournot game with location choice involving n ⩾ 2 competing firms. There are spatially contiguous markets along the interval [0,1] with relative size of the markets described by a continuous density function φ(x). The demand function for each individual consumer is the same in each market. Each firm first selects the location of its facility and then selects the quantities to supply to the markets, so as to maximize its profit. Earlier works on Cournot competition in spatial models have shown, assuming that the consumers are distributed uniformly over the markets, that firms typically tend toward central agglomeration. This paper extends the previous work by establishing the robustness of the agglomeration equilibrium to a broad class of density functions. Derived here are conditions under which: (i) agglomeration of all n firms is an equilibrium, (ii) agglomeration of duopolists is the only equilibrium, and (iii) duopolists exhibit a dispersed equilibrium. Examples of partial agglomeration are also constructed.

Upstream monopoly, downsteam competition and spatial price discrimination

Abstract Works on spatial competition with discriminatory pricing assume that the input market is competitive or, at least, that upstream input suppliers do not offer price schedules contingent on downstream location decisions. In the present paper it is assumed that an upstream monopoly sets the price of its output based on its observation of the locations chosen by the firms downstream. A complete characteri- zation of a subgame-perfect equilibrium is given. In particular, no equilibrium is efficient. Futhermore, the payoffs of the different firms in an equilibrium, point to an incentive shared by all of them for vertical integration.

Sequential entry and deterrence with competitive spatial price discrimination

Abstract This paper analyzes sequential entry with perfect foresight in a competitive spatial price discrimination model, with both an exogenous and an endogenous number of firms. The SPNE locations do not coincide with the social cost minimizing locations.

Location Equilibrium for Cournot Oligopoly in Spatially Separated Markets

Consider a two-stage non-cooperative Cournot game with location choice involving n≥ 2 firms each with several facilities. There are m≥ 2 spatially separated markets constituting the vertices of a network. Each firm first selects the locations of their facilities and then selects the quantities to supply to the markets to maximize its profit. There exists a Nash equilibrium in the quantities offered by each firm at the markets. Furthermore, when the demand in each market is sufficiently large, each firm chooses to locate its facilities only at vertices. With linear demand in each market, there exists a Nash location equilibrium.

Competitive spatial price discrimination with strictly convex production costs

Abstract This paper studies the equilibrium between two competing firms which have strictly convex production costs and which can engage in spatial price discrimination. The subgame perfect Nash equilibrium locations coincide with the social cost-minimizing locations, at the quartiles of the market, only when marginal cost of production is constant. When marginal cost of production is increasing, although social cost is minimized when the firms locate at the quartiles, they will locate elsewhere in the equilibrium.

Regulation and Deregulation in Surface Freight, Airlines and Telecommunications

The U.S. has increasingly deregulated large sections of the economy, including surface freight, airlines and most recently telecommunications. This chapter will discuss the history and rationale for regulation in these three industries. The results of deregulation in the surface freight and airline industry will be discussed, as well as the continuing challenges faced by these industries in the deregulated environment. While telecommunications deregulation has been less comprehensive and the industry has become increasingly difficult to define, this chapter will focus on the regulation of AT&T, its divestiture in 1984 and subsequent developments following the divestiture. After addressing the specific circumstances in each of these industries, a concluding section will summarize the nature of competition in each of the three industries.

Strategic behavior downstream and the incentive to integrate: A spatial model with delivered pricing

Abstract This paper highlights not previously examined incentives for vertical integration in a spatial model. A downstream monopoly that serves customers on a unit line segment and purchases an input from an upstream monopoly will strategically increase its transport costs. Such strategic behavior by the downstream firm forces the upstream firm to lower its input price rather than suffer an unacceptable decrease in sales. While the lower input price increases downstream profit, the unnecessary costs lower overall profit and welfare, generating both private and social incentives for vertical integration. This incentive is independent of others identified in the literature.

The Strategic Choice of Location and Transport Mode in a Successive Monopoly Model

This work emphasizes the incentives for vertical integration in a spatial model. A downstream monopoly will both strategically increase its transport costs and locate inefficiently relative to its customers. This forces the upstream monopolist to lower its input price rather than permit sales to decline. The excess costs and the inefficient location lower total profit in the vertical stream generating an incentive for vertical integration.