Mill pricing and spatial price discrimination: monopoly performance and location with spatial retail markets

Article Abstract:

Hong Hwang and Chao Cheng Mai's framework developed in their 1990 paper is extended to make retail markets explicitly spatial with the introduction of nonuniform population density functions. The model developed has density functions that approximate a pair of cities isolated from other cities. Results confirm past findings that spatial price discrimination performs better than mill pricing when markets are spatially isolated. Also confirmed are previous findings that mill pricing performs better than spatial price discrimination when markets are spatially contiguous. Results hold true if the company is allowed to choose the production facility site. Freight absorption rates are also found to be sensitive to assumptions on retail spatial market boundaries.

Price discrimination

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Mill and uniform pricing: a comparison

Article Abstract:

Mill and uniform pricing is examined for a monopolistic spatial market with nonlinear demand, a general consumer distribution function and a general transportation cost function, with focus on profit, price, output and welfare. The optimal uniform price less the average unit transportation cost is found to be lower than the optimal mill price when the demand is convex. Similarly, output under uniform pricing is lower than output under mill pricing, and welfare under uniform pricing is lower than welfare under mill pricing in convex demand scenarios. These hold true only if other respective conditions are satisfied.

Welfare, Public assistance

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Cournot retail chains

Article Abstract:

Competition among retail firms that result in significant implications on prices and profits were modeled after the spatial Cournot competition and yielded results which show that such competition among retail firms are dependent on the number of stores per location, the location of stores and transportation costs. The significant factors in the modeling is the transportation costs, which triggers a series of responses among the retail firms that is tantamount to an anticipatory action.

Retail Stores, Models, Retail industry, Retail trade, Stores

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