SPATIAL ASYMMETRIC DUOPOLY WITH AN APPLICATION TO BRUSSELS' AIRPORTS*

ABSTRACT In this paper, the problem of a city with access to two firms or facilities (shopping malls, airports, commercial districts) selling a differentiated product (shopping, flights) and/or offering a differentiated workplace is studied. Transport connections to one facility are congested. A model is presented for this asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages. A comparative statics analysis is used to illustrate the properties of the equilibrium. A numerical model is then applied to the two Brussels airports. Three stylized policies are implemented to address the congestion problem: expansion of transport capacity, congestion pricing, and a direct subsidy to the uncongested facility. Our results indicate that the degree of intrinsic differentiation between the two firms is crucial in determining the difference in profit and market share. Price and wage differences also depend on trip frequency and consumer preferences for diversity. Congestion pricing is the most effective policy tool but all three options are shown to have attractive attributes.     

SPATIAL PRICING IN INTERDEPENDENT MARHETS*

ABSTRACT. Conditions for spatial price equilibrium are derived for a set of firms in oligopolistic spatial competition, distributed at fixed locations in a heterogeneous region where consumer purchasing patterns are a probabilistic function of the price distribution rather than a deterministic function of proximity to firms. The resulting prices vary with accessibility to consumers or with the degree of local spatial monopoly, and result in non-zero profits for firms. Conditions describing the existence and stability properties of this spatial price equilibrium are defined, and are shown to be equivalent for two different hypotheses concerning disequilibrium pricing behavior: a partial price adjustment model and a Bertrand game. For two different profit goals, total profit maximization and profit rate maximization, it is shown that a spatial price equilibrium exists and is at least locally quasi-stable.     

ZONE PRICING*

ABSTRACT. Our purpose is to study a spatial price policy often encountered in the real world, known as zone pricing. This price policy consists in determining simultaneously several delivered prices together with the geographical zones in which they apply. It is shown that zone pricing approximates perfect spatial price discrimination and that the firm's profit increases with the number of zones. Furthermore, the number of markets supplied by the firm rises with the number of zones. Finally, zone pricing is compared to other standard spatial price policies and possible extensions are discussed.     

MILL AND UNIFORM PRICING A COMPARISON*

ABSTRACT. In this paper we examine profit, price, output and welfare under mill and uniform pricing in a monopolistic spatial market with nonlinear demand, a general consumer distribution function, and a general transportation cost function. We show that if demand is convex (concave) then the optimal uniform price minus the average unit transportation cost is lower (higher) than the optimal mill price, output under uniform pricing is lower (higher) than output under mill pricing, and welfare under uniform pricing is lower (higher) than welfare under mill pricing, provided other respective conditions are satisfied.     

SPATIAL PRICE POLICY AND THE DEMAND FOR TRANSPORTATION

For a spatial market of given radius transportation cost per unit sold is less under mill pricing than under any uniform pricing. This is true whether profit-maximizing monopoly prices or welfare-maximizing prices or any other prices are chosen.     

MEASURING CONTRIBUTING FACTORS TO INTERREGIONAL AGRICULTURAL LABOR PRODUCTIVITY DIFFERENTIALS: A JOINT PROFIT FORMULATION*

ABSTRACT Using Taylor series approximations of joint profit functions, a methodology is outlined to quantify interregional differentials in the Canadian agriculture sector by region and to quantify the contributing factors to regional labor productivity differences. These contributing factors are output price differentials–both crop and livestock, differentials in “land and buildings” capital deepening, “other” capital deepening, energy prices, other material prices, and efficiency. The joint profit formulation permits the analysis of effects of regional specific output price and output mix differentials.     

DEREGULATING THE DISTRIBUTION OF ELECTRICITY: PRICE AND WELFARE CONSEQUENCES OF SPATIAL OLIGOPOLY WITH UNIFORM DELIVERED PRICES*

ABSTRACT. Theoretical, spatial oligopoly models are developed and calibrated to simulate the price and welfare consequences of deregulating the retail price of electricity (the distribution function), assuming competing sources of generation supply are available. Two types of distribution competition are considered, retaining the currently used uniform delivered pricing structure: competition for customers at neighboring utilities’ borders and franchise competition. Because duplicate facilities are required for borderline competition, short-run price increases ranging between 14 and 37 percent over existing regulated prices are estimated for upstate New York, largely because deregulated prices reflect replacement, not historic, costs of facilities.     

UNIFORM SPATIAL PRICING

ABSTRACT Uniform spatial pricing means that a firm delivers its product to any customer at a fixed price, independent of location. Economic theory explains the use of uniform pricing by the added profit generated by absorbing freight charges of distant customers. I extend this insight by demonstrating that when demand elasticity and transportation cost are positively enough correlated, uniform pricing generates higher profits than mill pricing. I show that this result can better explain observed patterns of price policy choice by mail order and web firms. A second result is application of this idea to firms with many shipping facilities.     

HEDONIC PRICING WHEN HOUSING IS ENDOGENOUS: THE VALUE OF ACCESS TO THE TRANS‐ISRAEL HIGHWAY*

Standard hedonic house pricing assumes that house prices are independent of the intangible to be priced. A methodology is proposed in which the supply as well as the demand for housing depends on the intangible. The methodology is applied to value access to the Trans‐Israel Highway (TIH). Using spatial panel data (2002–2008) we show that TIH had two effects on the housing market. It increased house prices in locations with greater access to TIH, and it affected housing construction. Standard hedonic pricing would have underestimated the value of access because it ignores the effects of housing construction on the intangible to be priced. House prices began to increase three years before TIH was inaugurated, but housing construction did not anticipate the inauguration of TIH.     

THE SPATIAL MONOPSONY: A THEORETICAL ANALYSIS*

ABSTRACT. In this paper some of the most important properties of the behavior of a spatial monopsonist are derived. Many results are mirror images of corresponding results for the spatial monopolist. A few results are, however, genuinely new. A lot of effort is spent in comparing the properties of the profit function under three different pricing policies, f.o.b. (mill)-pricing, uniform delivered pricing, and spatial price discrimination. It is shown, for example, how the profitability and welfare consequences of the different policies are related to the shapes of the supply and demand functions. It is argued that the theory may have important applications in economic analyses of renewable natural resources such as forests, where total transportation costs are nonnegligible.     

Pricing Road Congestion: Recent Evidence from Singapore

The role of road pricing in travel demand management and congestion mitigation has been gaining support in many countries. Although the theory of congestion pricing is persuasive and straightforward, successful application of road pricing mandates that congestion externalities be estimated. Using data from a recent traffic survey in Singapore, this paper estimates congestion prices for alternative time values and vehicle types. These estimates are compared with the existing cost of area licenses, from which implications for economic efficiency and resource allocation are drawn.     

THE IMPACT OF CRIME ON APARTMENT PRICES: EVIDENCE FROM STOCKHOLM,SWEDEN

This study uses data of about 9,000 apartment sales in Stockholm, Sweden, to assess the impact of crime on property prices. The study employs hedonic pricing modelling to estimate the impact of crime controlling for other factors (property and neighbourhood characteristics). Geographic Information System (GIS) is used to combine apartment sales by coordinates with offences, land use characteristics and demographic data of the population. The novelty of this research is threefold. First, it explores a set of land use attributes created by spatial techniques in GIS in combination with detailed geographical data in hedonic pricing modelling. Second, the effect of crime in neighbouring zones at one place can be measured by incorporating spatial lagged variables of offence rates into the model. Third, the study provides evidence of the impact of crime on housing prices in a capital city of a traditional welfare state, information otherwise lacking in the international literature. Our results indicate that apartment prices in a specific area are strongly affected by crime in its neighbouring zones, regardless of crime type. When offences were broken down by types, residential burglary, theft, vandalism, assault and robbery individually had a significant negative effect on property values. However, for residential burglary such an effect is not homogenous across space, and apartment prices in central areas are often less discounted by being exposed to crime than those in the city's outskirts.     

A general equilibrium analysis of rural-urban migration under uncertainty

ABSTRACT. This paper analyzes the implications of an exogenous shift in relative prices for an economy that suffers from urban unemployment, as well as uncertainty, in the agricultural sector. Among other things, we show that with agricultural uncertainty, an exogenous shift in relative prices will lower agricultural profit. This result is in sharp contrast with the conventional case of risk-neutrality or certainty where agricultural profit is unaffected by changes in the terms of trade.     

世界遗产旅游产品性质与定价机制研究——以世界自然遗产九寨沟为例

文章以世界遗产景区九寨沟为例,分析了世界遗产旅游产品的性质,即：由公共资源和一系列服务耦合而成的复合性产品,具有“准公共产品”的性质。政府部门和私人部门结合提供世界遗产旅游产品,能兼顾社会福利与经济效率。而在我国,作为国家公共资源的世界遗产的属地管理体制,导致了世界遗产景区旅游产品定价的利润最大化倾向。文章结合我国国情,提出世界遗产旅游产品定价应采取平均成本加一定比例发展基金的定价方法和政府指导下市场供给定价相结合的方式。     

Dynamic road pricing and the value of time and reliability

High Occupancy Toll (HOT) lanes that use dynamic pricing to manage congestion and generate revenue are increasingly popular. In this paper, we estimate the behavioral response of drivers to dynamic pricing in an HOT lane. The challenge in estimation lies in the simultaneity of price and demand: the structure of dynamic tolling ensures that prices increase as more drivers enter the HOT lane. Prior research has found that higher prices in HOT lanes increase usage. We find that after controlling for simultaneity HOT drivers instead respond to tolls in a manner consistent with economic theory. The average response to a 10 percent increase in the toll is a 1.6 percent reduction in usage. Drivers primarily value travel reliability over time savings, although there is heterogeneity in the relative values of time and reliability based on time of day and destination to or from work. The results highlight the importance of both controlling for simultaneity when estimating demand for dynamically priced toll roads and treating HOT lanes with dynamic prices as a differentiated product with bundled attributes.     

A Spatial Price Determination Model for Multi‐Market Heterogeneously Distributed Resources: An Application to Forestry Markets in Sweden

The spatial dimension is a key paradigm in price determination, as attested by recent studies in the literature that highlighted the differential in market behavior between spatial and non‐spatial pricing settings. In this paper, we develop a model of spatial pricing for multi‐market heterogeneously distributed resources, with an application to the Swedish forestry sector. The focus of the model is to estimate the impact of spatial interaction on the demand for resources in terms of resource allocation, competition, and pricing. In its core, the pricing mechanism relies on a supply–demand framework. Using disaggregated data at the gridcell level for forest feedstock supply and harvesting costs in Sweden, we construct regional supply curves for each gridcell assuming a maximum transportation distance to delimit the potential market. Demand nodes are exogenously determined and are adjusted using a distance‐decay model to assess demand pressure across locations. We apply the model empirically to assess the impact on forest feedstock prices of a 20 TWh increase in biofuel production.     

Hedonic pricing analysis of the influence of urban green spaces onto residential prices: the case of Leipzig,Germany

In the light of global urbanization and biodiversity loss, ecosystem services provided by urban green spaces (UGS) are becoming increasingly important, not least as a recovery and recreation opportunity for citizens. The valuation of UGS is significant for urban planners, who make decisions on the creation or removal of UGS. We analysed the influence of UGS on residential property prices in Leipzig, Germany, by applying a hedonic pricing analysis. This analysis complements the existing literature by considering both sale and rental prices for flats and houses; moreover, the shape of UGS is taken into account explicitly; finally, it is the first study in Germany to analyse UGS in hedonic studies to such an extent. The results demonstrate that the size of the nearest UGS has a stronger impact on prices compared to the distance from it. With respect to shape, we found that the simpler the UGS shape, the higher the prices. Although we find an impact of UGS on prices, the impact is smaller than that of other characteristics. The proposed valuation approach and obtained results inform urban planners regarding the design of new UGS and raise awareness about potential intended and unintended economic and social effects.     

The Optimal Nodal Location of Public Facilities With Price-Sensitive Demand

The purpose of this paper is to present some models for the location of public facilities in nodal networks that explicitly maximize social welfare by accounting for price-elastic demand functions. The models presented here are general; yet they are mathematically equivalent to the plant location problem and are therefore amenable to solution procedures developed for the plant location problem. The models presented here distinguish between two institutional environments that reflect the degree of power of the consumer to choose which facility to patronize. If consumers can be assigned arbitrarily to facilities and can be denied service, then the environment is one of public fiat. If consumers must be served at the facility of their choice, then a “serve-allcomers” environment exists. Separate models for each environment are specified, and the relationship between optimal assignments and pricing policies is developed.     

On the cultural blessings of fixed book prices

The system of fixed book prices whereby publishers set the price customers pay at the bookstore is very common in Europe and, according to the European Parliament, it is a means of unique cultural importance. For this reason, it is considered to more than outweigh any negative effects on the economic efficiency of such regulations. The main conclusion of this article, however, is that it is quite hard to find convincing evidence, either theoretical or empirical, that fixed book pricing is better, even as a cultural means, than free book pricing.     

LOCATION AND SPATIAL PRICING FOR PUBLIC FACILITIES

ABSTRACT. Past analysis of public facility location has generally assumed a single goal, such as cost minimization or welfare maximization, and exogenous spatial pricing. This paper considers optimal facility location under a variety of goals. Furthermore, the facility manager is allowed to engage in freight absorption so that the delivered price to consumers need not reflect actual transportation costs. A systematic interaction among management goals, freight absorption, and the optimal size and spacing of public facilities is found.