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Strategic Accessibility Competition

Posted: 27 Feb 2010

See all articles by Emanuele Bacchiega

Emanuele Bacchiega

University of Bologna - Department of Computer Science and Engineering

Emanuela Randon

University of Bologna

Lorenzo Zirulia

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Multiple version iconThere are 2 versions of this paper

Date Written: February 26, 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: Accessibility Investment, Vertical Differentiation, Transport Costs

JEL Classification: L13, R42, L90

Suggested Citation

Bacchiega, Emanuele and Randon, Emanuela and Zirulia, Lorenzo, Strategic Accessibility Competition (February 26, 2010). Available at SSRN: https://ssrn.com/abstract=1559948

Emanuele Bacchiega (Contact Author)

University of Bologna - Department of Computer Science and Engineering ( email )

Mura Anteo Zamboni 7
Bologna, 40124
Italy

Emanuela Randon

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

Lorenzo Zirulia

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

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