Strategic Accessibility Competition

Quaderni Working Papers DSE No. 695

22 Pages Posted: 24 Sep 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 - School of Economics, Management, and Statistics

Multiple version iconThere are 2 versions of this paper

Date Written: March 8, 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: Strategic Accessibility Competition

JEL Classification: L13, R42, L9

Suggested Citation

Bacchiega, Emanuele and Randon, Emanuela and Zirulia, Lorenzo, Strategic Accessibility Competition (March 8, 2010). Quaderni Working Papers DSE No. 695. Available at SSRN: https://ssrn.com/abstract=1681348 or http://dx.doi.org/10.2139/ssrn.1681348

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 - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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