Spatial discrimination: Bertrand vs. Cournot with asymmetric demands

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Title:	Spatial discrimination: Bertrand vs. Cournot with asymmetric demands
Authors:	Liang, Wen-jung;Hwang, Hong;Mai, Chao-cheng
Contributors:	淡江大學產業經濟學系
Keywords:	asymmetric competition;demand analysis;market;modeling
Date:	2006-11
Issue Date:	2013-03-12 10:57:23 (UTC+8)
Publisher:	Amsterdam: Elsevier BV * North-Holland
Abstract:	This paper develops a barbell model a la Hwang and Mai [Hwang, H., and C.C. Mai, 1990, Effects of spatial price discrimination on output, welfare, and location, American Economic Review 80, 567–575.] with homogeneous product and asymmetric demands to compare prices, aggregate profits and social welfare between Cournot and Bertrand competition, and to analyze the firms' equilibrium locations. It focuses on the impacts of the spatial barrier generated from transport costs, and the market size effect resulting from asymmetric demands. It shows that the market-size effect is crucial in determining firms' locations under Cournot competition, but insignificant under Bertrand competition. Moreover, the equilibrium price of the large market and the aggregate profits are lower but the social welfare is higher under Cournot competition than under Bertrand competition if one of the markets is sufficiently large and the transport cost is high.
Relation:	Regional Science and Urban Economics 36(6), pp.790-802
DOI:	10.1016/j.regsciurbeco.2006.04.001
Appears in Collections:	[Graduate Institute & Department of Industrial Economics] Journal Article

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