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Free-on-board and uniform delivered pricing strategies in pure and mixed spatial duopolies: the strategic role of cooperatives

Panagiotou, Dimitrios and Stavrakoudis, Athanassios (2018): Free-on-board and uniform delivered pricing strategies in pure and mixed spatial duopolies: the strategic role of cooperatives.

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Abstract

The present work analyzes free-on-board against uniform delivered strategic prices in pure and mixed duopolistic spatial markets with reference to the food sector. Along with investor owned firms (IOFs) that maximize profits, we introduce member welfare maximizing cooperatives (COOPs) and examine their impact on the strategic pricing choices. Demand is price responsive. We use a two stage game between two IOFs, between an IOF and a COOP, and between two COOPs. The findings indicate that the introduction of COOPs acts as a disciplinary factor regarding the pricing behavior of the IOFs. As competition in the spatial market escalates, we move from the quasi--collusive (FOB,FOB) Nash equilibrium, where there are only IOFs in the market, to the more aggressive (UD,UD) strategic pricing configuration where COOPs replace one or both IOFs in the market.

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