We analyze the effect of competition in market-accessibility enhancement among quality-differentiated firms. Firms are located in regions with different ex-ante transport costs to reach the final market. We characterize the equilibrium of the two-stage game in which firms first invest to improve market accessibility and then compete in prices. Efforts in accessibility improvement crucially depend on the interplay between the willingness to pay for the quality premium of the median consumer and the ex-ante difference in accessibility between regions. From the social standpoint, also the accessibility investment depends on such a comparison. Finally, we endogenize quality choice and check the robustness of the result to some natural modifications of our assumptions.

Strategic accessibility competition / E. Bacchiega, E. Randon, L. Zirulia. - In: RESEARCH IN ECONOMICS. - ISSN 1090-9443. - 66:2(2012), pp. 195-212. [10.1016/j.rie.2011.12.001]

Strategic accessibility competition

L. Zirulia
Ultimo
2012

Abstract

We analyze the effect of competition in market-accessibility enhancement among quality-differentiated firms. Firms are located in regions with different ex-ante transport costs to reach the final market. We characterize the equilibrium of the two-stage game in which firms first invest to improve market accessibility and then compete in prices. Efforts in accessibility improvement crucially depend on the interplay between the willingness to pay for the quality premium of the median consumer and the ex-ante difference in accessibility between regions. From the social standpoint, also the accessibility investment depends on such a comparison. Finally, we endogenize quality choice and check the robustness of the result to some natural modifications of our assumptions.
Accessibility investment; Transport costs; Vertical differentiation
Settore SECS-P/01 - Economia Politica
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/2434/906091
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