Trip chaining: Who wins who loses?

André de Palma (1, 2) , Fay Dunkerley (3) , Stef Proost (3)

1 ENS Cachan - École normale supérieure - Cachan
2 X-DEP-ECO - Département d'Économie de l'École Polytechnique
3 KU Leuven - Catholic University of Leuven = Katholieke Universiteit Leuven

This paper studies how trip chaining (combining commuting and shopping or commuting and child care) affects market competition: in particular, pricing and the equilibrium number of firms as well as welfare. We use a monopolistic competition framework, where firms sell differentiated products as well as offering differentiated jobs to households, who are all located at some distance from the firms. The symmetric equilibria with and without the option of trip chaining are compared. We show analytically that introducing the trip chaining option reduces the profit margin of the firms in the short run, but increases welfare. The welfare gains are, however, smaller than the transport cost savings. In the free-entry long run equilibrium, the number of firms decreases but welfare is higher. A numerical illustration gives orders of magnitude of the different effects.

Mots clés: trip chaining; discrete choice model; imperfect competition; wage and price competition

Domaines: Gestion et management; Economies et finances

André de Palma, Fay Dunkerley, Stef Proost. Trip chaining: Who wins who loses?. 2008. ⟨hal-00348451⟩