Location choice of a partially–private monopoly supplier

0559021 - NHU-C 2023 RIV IN eng J - Článek v odborném periodiku
Lingga, Doriani - Simanjuntak, D.
Location choice of a partially–private monopoly supplier.
Studies in Microeconomics. Roč. 10, č. 1 (2022), s. 106-121. ISSN 2321-0222
Institucionální podpora: Cooperatio-COOP
Klíčová slova: cost asymmetry * location * monopoly supplier
Obor OECD: Applied Economics, Econometrics
Způsob publikování: Omezený přístup
https://doi.org/10.1177/23210222211032108

This paper analyzes the location choice of an upstream monopolist who supplies input to asymmetric duopoly firms in a downstream market. The monopolist is partially private, in that it cares not only about its profit maximization but also about the survival of the downstream firms. Based on the Hotelling model, we find that the monopolist is always attracted to locate closer to the efficient downstream firm. In particular, when the efficiency difference between the two downstream firms is not too high, such that no firm is driven out of the market, the monopolist locates at a distance of 1/6 from the efficient firm in the line segment of unit length. Finally, considering the downstream firms’ survival, we show that the upstream monopolist charges a higher input price on the efficient firm. This study may be relevant to the product differentiation framework, in which firms can benefit from producing goods that are close to the preference of high-type consumers, to the pharmaceutical industry, in which pharmacy companies must cover a broad market segment, or to the policymaking process, in which policymakers may have an incentive to make a policy preferred by a particular group of the society.
Trvalý link: https://hdl.handle.net/11104/0332444