COMPETITIVE DYNAMICS IN HIERARCHICALLY ORGANIZED MARKETS - SPATIAL DUOPOLY AND DEMAND ASYMMETRIES

In recent years, there has been considerable interest in the impact of corporate organizational structure on the configuration of prices, ou tputs, and profits in spatially extensive markets. In previous researc h I examined the general and analytical conditions defining both the e xistence and stability of an equilibrium in hierarchically organized s patial markets dominated by oligopolistic corporations that distribute a commodity directly to consumers through their retail franchises. He re I examine the disequilibrium dynamics resulting from this model. A bilevel decisionmaking process is hypothesized in which corporations v ary their delivered prices in response to changes in urban market dema nd and in which franchises vary their retail prices in response both t o changes in the cost of the commodity from their parent corporation a nd to the pricing strategies pursued by their competitors. The complex ity of interactions operating between the two levels of the model and the presence of asymmetrical demand conditions facing duopolistic corp orations suggests that it is unlikely that an overall spatial price eq uilibrium can actually be reached by such disequilibrium price-adjustm ent strategies.