Location choices with a non‐linear demand function

Abstract

This paper introduces a non‐linear hyperbolic demand function in a spatial shipping model. We show that, in contrast with the linear demand case, dispersion of firms emerges in equilibrium both when the firms compete through quantities and when they compete through prices. Further, the impact of the marginal production costs on the degree of firms' dispersion in equilibrium is positive when firms compete with prices, and it is inverse U‐shape when firms compete with quantities.

Zoning a metropolitan area*

“…In both shopping and shipping models welfare results often depend on this assumption (see, e.g. Gu and Wenzel ; Kitahara and Matsumura ; Gu et al ; Colombo ). If we drop the inelastic demand assumption and consider a constant elasticity demand function, when both municipalities are zoned our intuition is that the result that firms are pushed to locate closer to the middle of the market is maintained.…”

Does Behaviour‐based Price Discrimination Foster Firms’ Differentiation?

“…However, Esteves and Reggiani () have shown that the implications of BBPD may be different when the consumers have elastic demand rather than inelastic demand. A reasonable extension of the present set‐up may consist in including non‐unit demand functions of consumers (see also Colombo, ). Third, the comparison between standard BBPD and extreme BBPD may be enriched by adding a stage immediately after the location choice where each firm decides which pricing policy to adopt (standard BBPD, extreme BBPD, or uniform pricing).…”

Price‐sensitive demand and market entry

“…For instance, studies have focused on the structure of transport costs and customer distribution (e.g., Shilony ; Matsumura and Okamura ), the introduction of search costs (Braid ), delivered pricing models (Hamilton et al. ; Colombo ), or multiproduct competition (Janssen et al ). A recent overview is provided by Biscaia and Mota ().…”