The authors would like to thank the editor and the referees for useful comments on earlier versions of this paper. Andre de Palma thanks Institut de France for their support.
SPATIAL ASYMMETRIC DUOPOLY WITH AN APPLICATION TO BRUSSELS' AIRPORTS*
Version of Record online: 30 MAR 2009
© 2009, Wiley Periodicals, Inc.
Journal of Regional Science
Volume 49, Issue 3, pages 529–553, August 2009
How to Cite
Dunkerley, F., De Palma, A. and Proost, S. (2009), SPATIAL ASYMMETRIC DUOPOLY WITH AN APPLICATION TO BRUSSELS' AIRPORTS. Journal of Regional Science, 49: 529–553. doi: 10.1111/j.1467-9787.2009.00608.x
- Issue online: 3 AUG 2009
- Version of Record online: 30 MAR 2009
- Received: January 2006; revised: May 2007; accepted: October 2008.
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.