Quotation Grandner, Thomas. 2010. A Note on Product Differentiation in a Linear City and Wage Bargaining. Bulletin of Economic Research 62 (4): 407-416.


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Abstract

Economides (Economics Letters, 1986, 21, pp. 67-71) has shown that within a linear city an equilibrium exists in a two-stage location-price game when the curvature of the transportation cost function is sufficiently high. One important point is that not all of these equilibria are at maximal differentiation. In this paper, we include an additional stage with decentralized wage bargaining. This intensifies price competition resulting in locations that are nearer to the extremes of the city. The magnitude of this effect depends on the bargaining power of the unions. Contrary to the model with exogenously given costs, if unions are sufficient strong all price equilibria in pure strategies are at maximal differentiation. With a low parameter for the curvature of the transportation cost function unions can improve the location decision from a social viewpoint.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Bulletin of Economic Research
Citation Index SSCI
Language English
Title A Note on Product Differentiation in a Linear City and Wage Bargaining
Volume 62
Number 4
Year 2010
Page from 407
Page to 416
Reviewed? Y

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Grandner, Thomas (Details)
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Department of Economics (Kartal) (Details)
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