The paper extends the Salop model of localized competition by allowing firms to have heterogeneous costs. We provide a general but highly tractable analytical solution for the equilibrium prices, and we study the long-run properties of the model using two different entry games. We show that cost...

We characterise, for both separate and interdependent markets, the local pure-strategies Nash equilibrium of a spatial duopoly game, where consumers are horizontally and vertically heterogeneous, and firms have different cost structures and ranges of product lines. We show that standard results...

Three forces affect the pricing of a firm's inventory over time, if it can sell multiple units before any price adjustment takes place. Perishability drives prices down; scarcity and intertemporal price discrimination up. Hidden prices arise because all items, even if not immediately up for...

This paper investigates the response of full service carriers (FSCs) to the entry of low-cost carriers (LCCs). We develop a model of airline competition, which accommodates various market structures, some of which include low-cost players. Using data on published airfares of Lufthansa, British...

We consider a multi-period, limited capacity, unsegmented airline pricing model whose solution returns a sequence of increasing prices based on the order of sale. We show that a positive demand shock corresponding to an increase in the arrival rate reduces within-period price dispersion and has...