Strategic Accessibility Competition

Posted: 27 Feb 2010

See all articles by Emanuele Bacchiega

Emanuele Bacchiega

University of Bologna - Department of Economics

Emanuela Randon

University of Bologna

Lorenzo Zirulia

University of Bologna - Department of Economics; Bocconi University - Department of Economics; University of Bologna - Rimini Centre for Economic Analysis

Multiple version iconThere are 2 versions of this paper

Date Written: February 26, 2010

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, all the accessibility investment should be carried out by the high-quality firm. Finally quality choice is endogenized.

Keywords: Accessibility Investment, Vertical Differentiation, Transport Costs

JEL Classification: L13, R42, L90

Suggested Citation

Bacchiega, Emanuele and Randon, Emanuela and Zirulia, Lorenzo, Strategic Accessibility Competition (February 26, 2010). Available at SSRN: https://ssrn.com/abstract=1559948

Emanuele Bacchiega (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
40126 Bologna, 40125
Italy
+390512098486 (Phone)
+390512098493 (Fax)

Emanuela Randon

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

Lorenzo Zirulia

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy
+0258363368 (Phone)
+0258363399 (Fax)

HOME PAGE: http://www.cespri.unibocconi/zirulia

University of Bologna - Rimini Centre for Economic Analysis ( email )

Via Patara, 3
Rimini, 47900
Italy

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