SPATIAL COMPETITION AMONGST HIERARCHICALLY ORGANIZED CORPORATIONS - PRICES, PROFITS, AND SHIPMENT PATTERNS

In recent years, there have been computational and theoretical advance s in the analysis both of the equilibrium and of the disequilibrium pr operties of pricing models in which spatial markets are dominated by a utonomous firms engaged in oligopolistic competition. In this paper I develop an approach to the modeling of spatial pricing that transcends the unrealistic institutional simplification that firms are autonomou s and independent of corporate organizational structures. Specifically , I hypothesize that competition between corporations takes place at t wo spatial scales. At the intraurban scale, corporations compete for m arket share through their franchise sites, where market share is conti ngent upon the nature and degree of competition between franchises, th e spatial structure of the urban market, and the costs of production t o the franchise. At the intraurban scale, competition is defined in te rms of the strategies of the individual corporations as they adjust th eir delivered prices to urban markets in response to changes in their costs of production and distribution, the interurban transportation ne twork, and the achieved market share in each urban market. I demonstra te that, for a general corporate objective, there exists at least one spatial price equilibrium and that the stability conditions of this mo del are identical for two price-setting scenarios: a partial adjustmen t model and a Bertrand game. For the specific corporate objective of t otal-profit maximization, I examine the qualitative properties of the hierarchical model.