An Experimental Investigation of Equilibria Impacts of Information

Abstract

The theoretical literature on pricing in a spatial setting, where transportation costs exist and both buyers and sellers are geographically distributed, has been expanding and developing at a rapid pace. Indeed, it has been shown that the theoretical analysis of differential product markets is equivalent to the spatial framework [21;22]. However, empirical analysis of implications from these theoretical developments has only recently begun to appear.' One question that is frequently asked, since spatial competition is modeled in an oligopoly framework, is price reaction is most [8,905] for f.o.b. price setters in an interdependent spatial market (also see [2;5;6;18], among others). Similarly, one might ask which price reaction is most likely in a differentiated product market. Answers have been proposed on the basis of theoretical and/or intuitive arguments, but the issue has not been adequately explored empirically. The purpose of the study described in the following presentation was to empirically evaluate the various arguments about pricing behavior in spatial or product variety competition. Perhaps the primary reason for the lack of empirical analysis in regard to pricing behavior when consumers differentiate between sellers for locational or other reasons is lack of a data set