Spatial Pricing and the Location of Processors in Agricultural Markets

Spatially dispersed production and processing, endemic for most agricultural or renewable resource markets, causes oligopsonistic competition. The possibility and use of spatial price discrimination in these markets is well documented. It is also well known that the location of processors relative to competitors crucially affects the intensity of competition. However, insights regarding the relation between spatial price discrimination and the spatial differentiation of firms are barely present because the simultaneous investigation of these issues is often intractable analytically. We use computational economics to study these problems under a general theoretical framework. For instance, we show whether and under which conditions firms choose to differentiate their locations and/or price strategies. Results are consistent with observations in agricultural markets.spatial price competition, spatial differentiation, price discrimination, computational economics, Agribusiness,

ON WELFARE EFFECTS OF HORIZONTAL MERGERS WITH PRODUCT DIFFERENTIATION

We use a non-spatial (Chamberlinian) product differentiation model to analyze the welfare effects of horizontal mergers with quantity competition. We argue that(i) mergers can be welfare enhancing if the degree of product differentiation increases after the merger; and,(ii) privately profitable mergers can also increase welfare. Consequently, in this paper we demonstrate that the degree of product differentiation is a crucial factor to assess the welfare effects of a merger.Horizontal mergers; product differentiation; welfare.

Costly horizontal differentiation

We study the effect of quadratic differentiation costs in the Hotelling model of endogenous product differentiation. The equilibrium location choices are found to depend on the magnitude of the differentiation costs (relatively to the transportation costs supported by consumers). When the differentiation costs are low, there is maximum differentiation. When they are intermediate, there is partial differentiation, with a degree of differentiation that decreases with the differentiation costs. When they are above a certain threshold, there is no equilibrium. In any case, the socially optimal degree of differentiation is always lower than the equilibrium level. We also study the case of collusion between firms. If firms can combine locations but not prices, they locate asymmetrically when differentiation costs are high and choose maximum differentiation when they are low. When collusion extends to price setting, there is partial differentiation.Costly product differentiation, Spatial competition, Hotelling model

GENERIC COMMODITY PROMOTION AND PRODUCT DIFFERENTIATION

This paper considers whether generic promotion lowers the differentiation among competing brands as claimed in the 1997 Supreme Court case (Wileman et al. v. Glickman). Commodity promotion is modeled as a multi-stage game where products are vertically differentiated. Analytical results show that if the benefits of generic advertising from increased demand are outweighed by the costs from lower product differentiation then high-quality producers will not benefit from generic promotion but producers of lower-quality goods may.generic advertising, product differentiation, spatial model, Marketing,

Maximum or Minimum Differentiation? An Empirical Investigation into the Location of Firms

We empirically test some implications from location theory using the location of Los Angeles area gasoline stations in physical space and in the space of product attributes. We consider the effect of demand patterns, entry costs, and several proxies for competition -- the total number of stations, the proportion of independent stations, and the proportion of same-brand stations in a market -- on the tendency for a gasoline station to be physically located more or less closely to its competitors. Using an estimation procedure that controls for spatial correlation and controlling for market characteristics as well as non- spatial product attributes, we find that firms locate their stations in an attempt to spatially differentiate their product as general market competition increases. In other words, the incentive to differentiate in order to soften price competition dominates the incentive to cluster locations to attract consumers from rivals. We also find that spatial differentiation increases as stations become more differentiated in other station characteristics.product differentiation, spatial theory, location theory, retail gasoline

Product differentiation in a spatial Cournot model with asymmetric demand

This paper considers a spatial discrimination Cournot model with asymmetric demand. We use the geographical interpretation of the linear market and introduce differentiated products. We analyze a location-quantity game and show that agglomeration or dispersed locations may arise, depending on parameter combinations. The degree of differentiation plays an important role in location choice if the demand is asymmetric. The higher the degree of differentiation between the products the more likely is agglomeration. Only cases with a low degree of differentiation and a relatively low difference in market size leads to the absence of agglomeration in the larger market.Spatial Cournot competition, Agglomeration, Asymmetric demand structure, Product differentiation

Consumer welfare and market structure in a model of competition between open source and proprietary software

I consider a Vickrey-Salop model of spatial product differentiation with quasi-linear utility functions and contrast two modes of production, the proprietary model where entrepreneurs sell software to the users, and the open source model where users participate in software development. I show that the OS model of production may be more efficient from the point of view of welfare that the proprietary model, but that an OS industry is vulnerable to entry by entrepreneurs while a proprietary industry can resist entry by OS projects. A mixed industry where OS and proprietary development methods coexist may exhibit large OS projects cohabiting with more specialized proprietary projects, and is more efficient than the proprietary model of production from the point of view of welfare.open source; proprietary; software industry; copyright; non-profit organization; mixed market; welfare; spatial product differentiation