Spatial discriminatory pricing with a general cost function

Typescript (photocopy).This dissertation analyzes the pricing decision of firms that sell over distance (referred to as spatial firms) and consequently, are subject to significant transportation cost. An optional control framework is used to derive the profit maximizing delivered price function for a discriminatory pricing spatial firm. With the pricing solution found, the dissertation proceeds to present a more general model. The general model differs from previous models because it includes an unrestrictive production cost function. Using this general model, two topics are examined, the optimal market area sizes and the impact of spatial competition. Since the model has been generalized from previous models, results different from previous results are derived. The production cost function is shown to have a significant effect on the final outcomes. The main contributions of the research are the presentation of a general model for a spatial firm and the demonstration of the optimal control framework's applicability for analyzing a spatial firm. With the general model and an optimal control framework, a more thorough understanding of how spatial firms operate can be found