Location choice under delivered pricing: a reinterpretation

Abstract

This article reinterprets, under a common framework, previous results on location choice under delivered pricing. The paper clearly identifies the economic forces which explain why the socially optimal locations are an equilibrium of the location-price game in some models, and why they are not an equilibrium in other models. The paper shows that the rationale behind Hamilton et al. (Reg Sci Urban Econ 19:87–102, 1989) and Gupta’s (Reg Sci Urban Econ 24:265–272, 1994) nonoptimality results are very different. While the first result is explained by the social inefficiency of the price game, the second one is due to the existence of a strategic effect.