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Spatial price theory has typically assumed homogeneous gross demand curves among buyers who are dispersed over an economic landscape. Subtracting varying costs of distance to their locations yields a set of heterogeneous net demand curves. Any spatial monopolist subject to these conditions faces separable markets which are characterized by different effective demands. As a result price discrimination is feasible, and in theory straight-lined delivered price schedules of less than unit slope per unit cost of distance are customarily derived. But do spatial competitors ever discriminate (or appear to discriminate) over economic space? And if they do, what is the form of their delivered price schedules? Would their schedules also be linear given the same demand conditions that generate linear schedules for a discriminating monopolist? Without answering questions such as those raised above anti-trust regulations dealing with unfair price practices and, in particular, the determination of what is legal or illegal, ethical or not, cannot be readily accepted by economists. The present paper is designed to provide a basis for answering such questions by uncovering selected properties of spatial price discrimination under conditions of varying intensities of competition over an economic space. More generally, the paper is designed to determine the effect on prices of rival locations and the intensity of their competition. Sharp contrasts between spaceless and spatial price theory will thus be drawn, with competitive differences over the seller's trading area being revealed to generate differential discriminatory prices over the landscape. Авторский текст
Greenhut et al. (Sat,) studied this question.