A Welfare Analysis of Location Space Constraints with Vertically Separated Sellers

Li, Youping; Shuai, Jie

doi:10.1007/s11151-017-9568-x

Cited by 5 publications

(7 citation statements)

References 30 publications

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“…Conventional wisdom suggests that if the locations of firms is not restricted within the city, firms choose to locate outside the city. Our conclusion is remarkable different from the conventional results of Tabuchi and Thisse (1995), Lambertini (1997), Li and Shuai (2017). Differently from Tabuchi and Thisse (1995) and Lambertini (1997) that equilibrium locations are given by ( , )=(− 1 4 ⁄ , − 5 4 ⁄ ) 5 , we analyze a vertically related market in which each manufacturer exogenously located in the center of the city and each retailer pays the transportation costs in order to purchase a goods from its exclusive manufacturer.…”

Section: Introductioncontrasting

confidence: 69%

“…Proposition 1 is in sharp contrast to the conventional wisdom (e. g., see Tabuchi and Thisse (1995), Lambertini (1997), and Li and Shuai (2017). These studies show that firms choose to locate outside the city in an unconstraint Hotelling model with quadratic transportation costs.…”

Section: Resultsmentioning

confidence: 76%

“…So, from the viewpoint of each retailer, the closer it locates from its manufacturer, the smaller its transportation costs are. Li and Shuai (2017) is similar to our model in the context of a vertically related market. However, they assume that each upstream firm locates outside the city and no transportation costs for downstream firms.…”

Section: Introductionmentioning

confidence: 69%

“…3 One restricts the locations of firms within the linear city. 4 Another does not restrict the locations of firms within the linear city (Tabuchi and Thisse, 1995, Lambertini, 1997, Li and Shuai, 2017. The latter literature shows that, under a uniform distribution and quadratic transportation costs, firms choose to locate outside the market.…”

Section: Introductionmentioning

confidence: 99%

“…This paper studies a three-stage game in a bilateral duopoly in which each upstream firm sells its product through its separated downstream firms. As Li and Shuai (2017), each upstream firm sets the wholesale prices and each downstream firm sets the location and retail prices in sequence. We compare two cases.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Additional Transportation Costs benefit Consumer Surplus and Social Welfare in a Bilateral Duopoly

Han¹,

Lee²

2020

Bulletin of Applied Economics

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This paper examines the location selection by retailers in a bilateral duopoly. We suppose that the location is unconstraint. We compare two cases. One case is that each retailer incurs its transportation costs in order to purchase goods from its manufacturer. Another case is that it does not pay the transportation costs. Our conclusions are two. One is that both retailers locate inside the city, when retailers incur the transportation costs. The other is that consumer surplus and social welfare is larger under retailers’ paying transportation costs than under retailers’ no-paying transportation costs.

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