Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Product differentiation in a linear city and wage bargaining
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.
JEL-Codes: L13; J51; (follow links to similar papers)
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