An experiment on spatial competition with endogenous pricing

Hotelling's (1929) principle of minimum differentiation and the alternative prediction that firms will maximally differentiate from their rivals in order to relax price competition have not been explicitly tested so far. We report results from experimental spatial duopolies designed to address this issue. The levels of product differentiation observed are systematically lower than predicted in equilibrium under risk neutrality and compatible with risk aversion. The observed prices are consistent with collusion attempts. Our main findings are robust to variations in three experimental conditions: automated vs. human market sharing rule for ties, individual vs. collective decision making, and even vs. odd number of locations.

Spatial competition induces the mobilization of morula cells in the colonial ascidian Didemnum perlucidum (Tunicata: Didemnidae)

The effects of spatial competition among colonial marine organisms are often evident in the contact zones between colonies. These effects are especially pronounced when the interaction results in overgrowth or necrosis of one of the competitors. Ascidians, one of the dominant taxonomic groups in subtidal sessile communities, have specialized morula cells that provide a defense against microbial infections. Injuries resulting from interspecific competitive interactions might also act as a stimulus for this defensive mechanism. Therefore, we expected to see the recruitment of morula cells in tissues near competitor contact zones. To test the hypothesis that spatial competition elicits this immune response, we placed colonies of the ascidian Didemnum perlucidum from southeastern Brazil in four different types of competitive situations: (1) overgrowth of the competitor, (2) stand-off interactions, (3) overgrowth by the competitor, and (4) free of competitors. Our results indicate that competitive interactions increase the population of morula cells in contact zones, as more cells were observed in interactions that resulted in the overgrowth of individuals of D. perlucidum, and fewer cells were observed in colonies that were free of competitors. We identified the defensive function of the morula cells by showing the presence of the enzyme phenoloxidase within its vacuoles. Phenoloxidase is a widespread enzyme among animals and plants, and is frequently used in defense by synthesizing toxic quinones from polyphenol substrates. This is the first study to document the presence of morula cells in didemnid ascidians and the mobilization of these cells by spatial competition by heterospecifics, and one of the first studies to identify phenoloxidase activity in morula cells.

The Role of Online Platforms for Media Markets – Two‐Dimensional Spatial Competition in a Two‐Sided Market

We analyze the market for online and offline media in a model of two-dimensional spatial competition where media outlets sell content and advertising space. Consumer preferences are distributed along the style and type of news coverage where the distance costs may vary across dimensions. For integrated provision of online and offline platforms we show that entering the online market reduces average profits and may even constitute a prisoner's dilemma. Specialized provision may yield polarization in the style and type dimensions. This is in contrast to the maximum–minimum differentiation result previously established in the literature on multidimensional horizontal competition. We show that maximal differentiation in both dimensions occurs due to the discrete nature of the type dimension and asymmetric advertising markets.

Competition effects from patient mobility in the European Union

This paper studies the effects of reimbursement for medical tourism within the European Union. We use a spatial competition framework to study the effects on prices, qualities and patient flows between two countries. Patient mobility increases with the implementation of reimbursement mechanisms. The resulting equilibria in prices and qualities depend on the rule of reimbursements and possible differences in country specific parameters. Soft budget constraints that public providers may have, pose a competitive advantage over private providers and divert demand toward the former. Supranational coordination concerning soft budgets constraints is needed to address the potentially detrimental effects on aggregate welfar

Effects of competition on sexual and clonal reproduction of a tunicate: the importance of competitor identity

Individual fitness and the structure of marine communities are strongly affected by spatial competition. Among the most common space holders are the colonial ascidians, which have the ability to monopolize large areas of hard substrate, overgrowing most other competitors. The effects of competition on colony growth and on gonad production of the ascidian Didemnum perlucidum were studied in southeastern Brazil by experimentally removing surrounding competitors. Colonies of D, perlucidum competing for space exhibited a growth rate 9 times less than that of colonies that were competitor free. Among the colonies subject to competition, growth rates were unrelated to the percentage of colony border that was free of competitors. However, the identity of the competitor was important in the outcome of border contacts. At the beginning of the experiment, most border encounters of D. perlucidum were with solitary organisms, which in most cases were overgrown. These were progressively replaced by colonial ascidians and bryozoans, resulting mostly in stand-off interactions. Besides reducing asexual growth, spatial competition also affected female gonad production. Colonies free of competitors had a significantly higher proportion of zooids with ovaries. Thus, our findings show that spatial competition reduces both ascidian colony size and gonad production.

Location-price competition with externality: an application to the Tenerife tram

[EN] This paper presents a location–price equilibrium problem on a tree. A sufficient condition for having a Nash equilibrium in a spatial competition model that incorporates price, transport, and externality costs is given. This condition implies both competitors are located at the same point, a vertex that is the unique median of the tree. However, this is not an equilibrium necessary condition. Some examples show that not all medians are equilibria. Finally, an application to the Tenerife tram is presented.

Gázolaj-jövedékiadó verseny az Európai Unióban (Fiscal competition on the market for diesel fuel in the European Union)

A tanulmány azt a kérdést vizsgálja, hogy versenyeznek-e az európai kormányok gázolajra vonatkozó jövedékiadó-kulcsaikkal a nagyobb adóbevételekért, és ha igen, befolyásolja-e az országok mérete kormányaik adóztatási stratégiáját. Az üzemanyagturizmussal szembesülő kormányok adókivetési magatartását egy kétországos adóverseny modellel jelezzük előre, amelyben a standard modellektől eltérően a fogyasztók kereslete árrugalmas. Megmutatjuk, hogy ha a kereslet nem teljesen rugalmatlan, mint Nielsen [2001], illetve Kanbur-Keen [1993] modelljeiben, akkor a nagy ország kormányának egyensúlyi viselkedése nemcsak abban különbözik a kicsiétől, hogy nagyobb adót állapít meg, hanem abban is, hogy válaszfüggvénye meredekebb. Az aszimmetrikus adóverseny általunk használt modelljét a dízelüzemanyagoknak 16 európai ország 1978 és 2005 közötti jövedékiadó-adatain vizsgáljuk. Az 1995 és 2005 közötti időszakra vonatkozó becslési eredményeink megerősítik, hogy az európai országok szomszédaik adókulcs-változtatásának hatására változtattak saját adókulcsaikon, és hogy a területileg/gazdaságilag kisebb országok kisebb intenzitással reagáltak szomszédaik adóváltoztatásra, mint a nagyobbak. Tanulmányunk ezzel magyarázatot nyújt arra is, hogy miért erősödött fel a tagállamok jövedéki adókulcsainak méret szerinti differenciálódása az elmúlt bő tíz évben, valamint hogy miért nem sikerült az Európai Uniónak a minimumadószintre vonatkozó előírásával előbbre lépnie az egységes adóztatás megvalósításában. / === / The paper assesses spatial competition in diesel taxation among European governments. By adding an extension to the standard model, it is shown that asymmetric competition – small countries undercutting large – implies that small countries respond less strongly to tax changes by their neighbours than large countries do. An estimate is then made of the fiscal reaction functions for national governments, employing a first-difference regression model with a weighting scheme constructed from road-traffic density data at national borders. Data from 16 countries (EU-15 minus Greece plus Norway and Switzerland) between 1978 and 2005 provides evidence that European governments set their diesel tax interdependently, and moreover, that small European countries tend to react less strongly to changes in their competitors' tax rate than large countries do.

Consumer Behavior and Firm Competition

Understanding consumer behavior is critical for firms' decision making. How consumers make decisions about what they want and buy directly affect the profits of firms. Therefore, it is important to consider consumer behaviors and incorporate them into the model when studying the optimal strategy of firms and competition between firms. In this dissertation, I study rich and interesting consumer behaviors and their impact on firms' strategy in two essays. The first essay considers consumers' shopping cost which leads to their preference for one-stop shopping. I examine how store visit costs and consumer knowledge about a product affect the strategic store choice of consumers and, in turn, the pricing, customer service and advertising decisions of competing retailers. My analysis offers insights on how specialty stores can compete with big-box retailers. In the second essay, I focus on a well-established psychology phenomenon, cognitive dissonance. I incorporate the idea of cognitive dissonance into a model of spatial competition and examine its implications for selling strategy. I provide new insight on the profitability of advance selling and spot selling as well as the pricing of bundle and its components. Collectively, two essays in this dissertation introduce novel ways to model consumer behaviors and help to understand the impact of consumer behaviors on firm profitability and strategy.

Looking for safe harbor in a crowded sea: Coastal space use conflict and marine renewable energy development

Technological advances in the marine renewable energy industry and increased clarity about the leasing and licensing process are fostering development proposals in both state and federal waters. The ocean is becoming more industrialized and competition among all marine space users is developing (Buck et al. 2004). More spatial competition can lead to conflict between ocean users themselves, and to tensions that spill over to include other stakeholders and the general public (McGrath 2004). Such conflict can wind up in litigation, which is costly and takes agency time and financial resources away from other priorities. As proposals for marine renewable energy developments are evaluated, too often decision-makers lack the tools and information to properly account for the cumulative effects and the tradeoffs associated with alternative human uses of the ocean. This paper highlights the nature of marine space conflicts associated with marine renewable energy literature highlights key issues for the growth of the marine renewable energy sector in the United States. (PDF contains 4 pages)

Zoning a cross-border city

This paper investigates zoning in a cross-border linear city that consists of two bordering towns. In each town a local regulator has a say in the location of the local firm. The incentive to gain consumers from the other town, or not to lose local consumers, may push regulators to approve only locations for firms close enough to the frontier. When zoning is costly an asymmetric equilibrium may emerge: only one regulator resorts to zoning. In the case of towns of different sizes the regulator of the larger town is the only one that zones in an asymmetric equilibrium.

How Could We Explore the Terrorist Issue?

The problem of terrorism can be analyzed by means of a wide array of research theories and models. There is however a question which of these may be regarded as especially useful to analyze different aspects of terrorism such as its reasons, characteristics and effects. Among concepts or theories which more or less fulfill the above-mentioned requirements, one can mention: chaos theory, decision theory, spatial competition theory, exchange theory, black box theory, theory of disaster, system model, model of billiard balls, core model, asymmetrical model, network model or concept of hybridity.

Does it pay to be socially responsible? Evidence from spanish retail banking sector

This paper presents a theoretical and empirical analysis of strategic competition in retail banking when some of the financial firms are non-profit organisations that invest in social activities. Banking literature about competition is fairly large, but the strategic interaction between profit maximizing and non profit maximizers has not been extensively analysed except for Purroy and Salas (1999). In this paper, a completely different approach is taken. An adaptation of Hotelling’s two stage model of spatial competition is developed to take into account consumer perceptions respect to the two different types of financial institutions. The empirical analysis confirms that consumers take into account other features different from the price, such as social contribution or closer service to make a deposit or mortgage decision. These conclusions are of interest in the debate about a firm’s social or ethical activities. It is shown that if consumers value social activities, firms can improv