Spatial price discrimination and location choice with labor markets

This paper generalizes Hwang and Mai’s (Am Econ Rev 80:567–575, <CitationRef CitationID="CR10">1990</CitationRef>) model to include labor markets and shows that their results are still valid when the difference of inverse demand slopes is large enough, while, when this difference is small, a monopoly firm always chooses the same (boundary) location under different pricing scenarios. In the latter situation, total outputs are identical in different pricing scenarios, while the social welfare under discriminatory pricing is definitely less than that of the mill pricing. Our results are robust, no matter whether the commuting costs are paid by the firm or workers, and no matter whether wages are discriminatory or uniform. Copyright Springer-Verlag Berlin Heidelberg 2014