SPATIAL PRICE-DISCRIMINATION AND LOCATION CHOICE WITH NONUNIFORM DEMANDS

Using a general model with non-uniform demands, this paper analyzes the effects of spatial price discrimination under both exogenously and endogenously determined location of the firm. When location is exogenously determined, the well-known conclusion that output is unaffected and consumer surplus and total welfare fall under spatial price discrimination continues to hold. However, when location is chosen endogenously, output falls and consumer surplus and total welfare may rise or fall under discriminatory pricing.