Product differentiation in a linear city and wage bargaining

Publication: Working/Discussion PaperWU Working Paper

Abstract

Economides (1986) 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.
Original languageEnglish
Place of PublicationVienna
PublisherInst. für Volkswirtschaftstheorie und -politik, WU Vienna University of Economics and Business
Publication statusPublished - 2007

Publication series

NameDepartment of Economics Working Paper Series
No.109

WU Working Paper Series

  • Department of Economics Working Paper Series

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