Travel Circle: A Model of Supply Chains

Lau, C. Oscar (2022): Travel Circle: A Model of Supply Chains.

Abstract

Travel circle is a metaphor for supply chains: in travel circle, travelers are transported by carriers in multiple legs from the center to diverse destinations on the circumference; in supply chains, goods are transformed in multiple stages by firms from natural resources into differentiated products. The model is generated using only three cost parameters. At the start of supply chains, a few firms mass-produce standardized commodities at low unit costs; at the end, many firms produce distinctive products in small scales at high unit costs. As an extension, the circle’s size is endogenized to account for consumers’ preferences for varieties.

• Item Type: MPRA Paper
• Language: English
• Keywords: Product differentiation, Scale economies, Entry game
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope

References

Balasubramanian, Sridhar. 1998. “Mail versus Mall: A Strategic Analysis of Competition between Direct Marketers and Conventional Retailers.” Marketing Science, 17(3): 181–195.

Baumol, W. J., and W. G. Bowen. 1965. “On the Performing Arts: The Anatomy of Their Economic Problems.” The American Economic Review, 55(1/2): 495–502.

Becker, Gary S. 1981. A treatise on the family. Harvard University Press.

Bouckaert, Jan. 2000. “Monopolistic competition with a mail order business.” Economics Letters, 66(3): 303–310.

Chen, Yongmin, and Michael H. Riordan. 2007. “Price and Variety in the Spokes Model.” The Economic Journal, 117(522): 897–921.

Dixit, Avinash K., and Joseph E. Stiglitz. 1977. “Monopolistic Competition and Optimum Product Diversity.” The American Economic Review, 67(3): 297–308.

Firgo, Matthias, Dieter Pennerstorfer, and Christoph R. Weiss. 2015. “Centrality and pricing in spatially differentiated markets: The case of gasoline.” International Journal of Industrial Organization, 40: 81–90.

Frank, Robert H. 2006. “The Economic Naturalist Writing Assignment.” The Journal of Economic Education, 37(1): 58–67.

Helpman, Elhanan. 1981. “International trade in the presence of product differentiation, economies of scale and monopolistic competition: A Chamberlin-Heckscher-Ohlin approach.” Journal of International Economics, 11(3): 305– 340.

Jeitschko, Thomas D., and C. Oscar Lau. 2017. “Soft transactions.” Journal of Economic Behavior and Organization, 141: 122–134.

Krugman, Paul. 1980. “Scale Economies, Product Differentiation, and the Pattern of Trade.” The American Economic Review, 70(5): 950–959.

Lancaster, Kelvin. 1980. “Intra-industry trade under perfect monopolistic competition.” Journal of International Economics, 10(2): 151–175.

Loginova, Oksana. 2009. “Real and Virtual Competition.” The Journal of Industrial Economics, 57(2): 319–342.

Madden, Paul, and Mario Pezzino. 2011. “Oligopoly on a Salop Circle with Centre.” The B.E. Journal of Economic Analysis and Policy, 11(1).

Neilson, William S. 1999. “The economics of favors.” Journal of Economic Behavior and Organization, 39(4): 387–397.

Salop, Steven C. 1979. “Monopolistic Competition with Outside Goods.” The Bell Journal of Economics, 10(1): 141–156.

Tirole, Jean. 1988. The Theory of Industrial Organization. The MIT Press.

Williamson, Oliver E. 1975. Markets and Hierarchies, Analysis and Antitrust Implications: A Study in the Economics of Internal Organization. New York: Free Press.

Williamson, Oliver E. 1985. The economic institutions of capitalism : firms, markets, relational contracting. New York: Free Press.