Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162547
Authors: 
Hunold, Matthias
Muthers, Johannes
Year of Publication: 
2017
Series/Report no.: 
DICE Discussion Paper 254
Abstract: 
We characterize mixed-strategy equilibria in a setting with capacity constrained suppliers which can charge location based prices to different customers. The equilibrium prices weakly increase in the transport distance between supplier and customer, whereas the margins decrease. Despite prices above costs and excess capacities, the competing suppliers exclusively serve their home markets in equilibrium. Competition yields volatile market shares and an inefficient allocation of more distant customers to firms. Even ex-post subcontracting may restore efficiency only partly. The suppliers sometimes do not cross-supply each other as this can intensify competition by relaxing the receiver's capacity constraint. We use our findings to discuss recent competition policy cases and provide hints for a more refined coordinated-effects analysis.
Subjects: 
Bertrand-Edgeworth
capacity constraints
inefficient competition
spatial price discrimination
subcontracting
transport costs
JEL: 
L11
L41
L61
ISBN: 
978-3-86304-253-0
Document Type: 
Working Paper

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