Trip Chaining: Who Wins Who Loses?

This paper studies how trip chaining (combining commuting and shopping or commuting and child care) affects market competition: in particular, pricing and the equilibrium number of firms as well as welfare. We use a monopolistic competition framework, where firms sell differentiated products as well...

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Bibliographic Details
Published inJournal of economics & management strategy Vol. 19; no. 1; pp. 223 - 258
Main Authors De Palma, Andre, Dunkerley, Fay, Proost, Stef
Format Journal Article
LanguageEnglish
Published Malden, USA Blackwell Publishing Inc 01.03.2010
Wiley Subscription Services, Inc
Subjects
Business studies
Commuting
Comparative analysis
Industrial prices
Industrial pricing
Market entry
Marketing
Monopolistic competition
New products
Price formation
Price policy
Prices
Product management
Studies
Transportation
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Summary:This paper studies how trip chaining (combining commuting and shopping or commuting and child care) affects market competition: in particular, pricing and the equilibrium number of firms as well as welfare. We use a monopolistic competition framework, where firms sell differentiated products as well as offering differentiated jobs to households, who are all located at some distance from the firms. The symmetric equilibriums with and without the option of trip chaining are compared. We show analytically that introducing the trip chaining option reduces the profit margin of the firms in the short run, but increases welfare. The welfare gains are, however, smaller than the transport cost savings. In the free‐entry long‐run equilibrium, the number of firms decreases but welfare is higher. A numerical illustration gives orders of magnitude of the different effects.
Bibliography:istex:9FB42C70CD1F7236C9953935630713C10363E37F
ark:/67375/WNG-19QFH592-H
ArticleID:JEMS251
The authors thank the Flanders Fund for Scientific Research FWO‐Flanders’ project on political economy of transport pricing and investment and the French research contract “Systèmes complexes en SHS: Economie spatiale et dynamique non linéaire. The first author thanks the Institut Universitaire de France. The authors are indebted to a coeditor, two referees of this journal, and G. Giuliano for helpful comments.
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:1058-6407
1530-9134
DOI:10.1111/j.1530-9134.2009.00251.x