Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56121
Authors: 
Friberg, Richard
Martensen, Kaj
Year of Publication: 
2001
Series/Report no.: 
SSE/EFI Working Paper Series in Economics and Finance 471
Abstract: 
To the surprise of many, price deviations between markets characterized by imperfect competition have often been little affected by lower transport costs. In a Cournot model we show that if firms' decisions to segment markets are endogenous, then lower transport costs are, in many cases, associated with greater price differentials between markets. The intuition is that lower transport costs, by facilitating arbitrage, place a tighter restriction on the maximization problem and a firm is willing to take a greater cost in order to segment. We examine how the resulting equilibria depend on transport costs, product differentiation and costs of segmenting.
Subjects: 
price discrimination
market integration
law of one price
JEL: 
D43
F15
L13
Document Type: 
Working Paper

Files in This Item:
File
Size
414.92 kB
163.63 kB
279.3 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.