Jacques-François Thisse

Price competition, quality and income disparities

Abstract A market is considered, the demand side of which consists of a large number of consumers with identical tastes but different income levels, and the supply side, of two firms selling at no cost products which are relatively close substitutes for each other. Consumers are assumed to make indivisible and mutually exclusive purchases. A full characterization of the demand structure and the non cooperative market solution is given, and the dependence of the latter on income distribution and quality parameters is analyzed.

Entry (and exit) in a differentiated industry

The entry process in an industry embodying more or less close substitutes is considered. One examines whether the increase in the number of substitutes induces pure competition when prices are chosen noncooperatively. It is shown that there exists an upper bound on the number of firms which can compete in the market: when this upperbound is reached, any further entry entails the exit of an existing firm. In spite of this fact, new entries imply the decrease of prices to the competitive ones.

Asymmetric equilibria in spatial competition

Abstract The main purpose of this paper is to study the impact of consumer concentration around the market center on the equilibrium locations of location-price games. In the case of symmetric triangular density, it is shown that no symmetric equilibrium exists. However, we demonstrate the existence of asymmetric equilibria in pure strategies; these equilibria are also characterized. Our secondary purpose is to study the sequential entry of two firms when the location space is not restricted to the market space. This leads us to uncover a substantial first-mover advantage, which has been neglected in the literature.

Privatization and Efficiency in a Differentiated Industry

We consider a market in which a public firm competes against private ones, and ask what happens when the public firm is privatized. In the short run, privatization is harmful because prices rise: the disciplinary role of the public firm is lost. In the long run, privatization leads to further entry; the net effect is beneficial if consumer preference for variety is not too weak. A sufficient statistic for the social surplus to he higher in the long run is that the public firm makes a loss. This suggests that profitable firma should not necessarily be privatized.

Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Loses from It?

This Paper proposes a two-region model of endogenous growth, which is a natural combination of a core-periphery model a la Krugman and of a model of endogenous growth a la Grossman/Helpman/Romer. Specifically, we add to the core-periphery model an R&D sector that uses skilled labour to create new varieties for the modern sector, while forward-looking migration behaviour is introduced. The innovation activity in the R&D sector involves knowledge externalities among skilled workers. Our analysis suggests that the presence of such a sector reinforces the tendency toward agglomeration, and supports the idea that the additional growth spurred by agglomeration may lead to a Pareto-dominant outcome such that when the economy moves from dispersion to agglomeration, innovation follows a much faster pace. As a consequence, even those who stay put in the periphery are better off than under dispersion, provided that the growth effect triggered by the agglomeration is strong enough.

Commodity Taxation in a Differentiated Oligopoly

The authors introduce commodity taxation into a vertical differentiation model with endogenous product selection. They show that a uniform ad valorem tax lowers both qualities, distorts the allocation of consumers between firms, and lowers the consumer prices of both variants. A small uniform tax is always welfare-improving over the no-tax equilibrium. A differentiation of tax rates may or may not be desirable on welfare grounds. If a welfare improvement is possible through a nonuniform tax, it is always the high-quality variant that must be taxed at a higher rate. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

The location of production activities

Publisher Summary This chapter discusses the issue of location for production activities. In general, the availability of resources, the location of population as a source of labor and as potential markets, soil, climate, and technical conditions rule out many locations for any specific economic activity. What remains is a set of feasible locations among which an economic choice is to be made. The main problems facing the location theorists can be listed as spatial demand and supply; spatial pricing and output; locational choice; spatial resource (land) use; and spatial equilibrium of production. The chapter discusses the analysis of spatial monopoly. It describes the spatial structure of three different price policies: mill, uniform, and (spatial) discriminatory pricing. The chapter compares these price policies in the context of two firms competing to attract customers, termed as “spatial duopoly.” The strategic interdependence between these firms may generate serious difficulties regarding the existence of a (noncooperative) price equilibrium.. The chapter also deals with the concept of spatial oligopoly in a homogeneous space. |It considers only the mill pricing and compares three solution concepts: Bertrand price equilibrium (competitive oligopoly), Losch price equilibrium (collusive oligopoly), and Cournot quantity equilibrium.

Integration, agglomeration and the political economics of factor mobility

This paper tackles the issue of the optimality of agglomeration in a two-region economy with skilled/mobile and unskilled/immobile workers. The market leads to the optimal outcome when transport costs are high or low. However, for intermediate values, it yields agglomeration whereas dispersion is socially desirable. We show that competitive lobbying on factor mobility by the two groups of workers sustains the second best optimum.

A representative consumer theory of the logit model

The log it model is usually derived from a discrete choice approach with stoc hastic utilities. It is shown here that the logit demand system may also be derived from the maximization of a deterministic, entropy-type utility. The latter may be interpreted as the preference function of a representative consumer with variety-seeking behavior. This altern ative view suggests a generalization of the standard logit which allo ws total demand to be determined endogenously. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Outcomes of voting and planning: Condorcet, Weber and Rawls locations

Abstract The paper is concerned with the comparison of the locations of a facility resulting from voting and planning procedures. It is shown that a voting location exists and coincides with that minimizing the total distance covered by the users to go to the facility when the transportation network contains no cycles. For a general network, least upper bounds on the ratio of the social values of the voting and planning locations are given in the cases where the total or the maximal travelled distance is minimized.