A NOTE ON BILATERAL MONOPOLY AND THE OPTIMUM LOCATION OF VERTICALLY RELATED FIRMS*

This note considers Blair, Kaserman, and Romano's conclusion (1989) that the only optimal solution in the case of bilateral monopoly is the joint profit maximization solution and examines the pattern of industrial location under joint profit maximization.     

MILL PRICING AND SPATIAL PRICE DISCRIMINATION MONOPOLY PERFORMANCE AND LOCATION WITH SPATIAL RETAIL MARKETS*

ABSTRACT. Most of the monopoly spatial price discrimination literature explicitly assumes uniform population density over space. It also implicitly assumes that firms (plants) are spatially isolated from each other with production and retail points that coincide in location. While departures from these assumptions have been explored separately in the literature, it remains to examine performance and location when these assumptions are relaxed simultaneously. What emerges in this paper is a model where density functions approximate a pair of cities isolated from other cities. Each city has its own retail market, while the location of a single production or wholesale point is determined by characteristics of the two markets. Comparisons of mill pricing and spatial price discrimination found in the spatial monopoly literature can be interpreted as special cases of the more general framework provided here.     

The Effect of Hedonic Migration Decisions and Region-Specific Amenities on Industrial Location: Could Silicon Valley Be in South Dakota?

This paper analyzes the effect of hedonic migration decisions and regional amenities on industrial location. Labor-intensive firms bifurcate into companies that follow the workers completely to the most attractive places, and companies which engage in a trade-off between "following" and "compensation for disamenities." In the latter case, regional amenities induce three distinct location patterns: (a) a concentration of firms where the level of amenities is rapidly changing, (b) a gradual change of industrial composition at intermediate locations, and (c) a concentration of specific industries at the periphery of high-amenity areas. These patterns explain some of the controversial empirical findings about regional amenities and migration.     

Functional Relations in Distribution Channels and Location Patterns of the Dutch Wholesale Sector

Wholesale firms play an important role in the distribution of goods. They stimulate the flow of goods towards the final consumer by means of their intermediate position between the manufacturing sector and the retail sector in the distribution channel. This paper will focus on the question whether there is a link between the position of wholesale businesses in the distribution channel and their spatial choice of location. Can the position of the wholesale sector in the distribution channel be regarded as an influential location factor or not? As such, the location factor to elaborate is the location with regard to the suppliers and buyers of wholesale firms. First, the change of the spatial pattern over the long term is set out by means of a series of maps. Second, an inquiry has been set out in order to obtain an insight to the position of wholesale firms in the distribution channel. The major findings are that the sectors of repair shops, retail, manufacturing industry and building industry have the most business contacts with wholesale firms. Most business contacts are on a national level. The position of the wholesale sector in the distribution channel alone does not explain the choice of location. But the paper shows that the position is closely linked to other factors, such as accessibility, short distances and centrality.     

PRICE UNCERTAINTY AND PRODUCTION-LOCATION DECISIONS UNDER FREE ENTRY OLIGOPOLY*

ABSTRACT. This paper departs from earlier work on location theory under uncertainty by considering an oligopoly case where the symmetric Cournot-Nash equilibrium of imperfectly competitive and identical firms are examined. It will be shown that once a Cournot competitive equilibrium is introduced, the demand function plays a central role in the choice of location, and the effects of changes in fixed costs, mean product price and price variability on the firm's optimum location and output are independent of absolute and/or relative risk aversion. These striking results are in sharp contrast with the well-known results obtained in previous contributions to the location literature.     

ZONING A CROSS‐BORDER CITY

This paper investigates zoning in a cross‐border linear city that consists of two bordering towns. In each town, a local regulator has a say in the location of the local firm. We find that local regulators may use zoning strategically. The incentive to gain consumers from the other town, or not to lose local consumers, may push regulators to approve only locations for firms close enough to the frontier. When zoning is costly an asymmetric equilibrium may emerge: only one regulator resorts to zoning. In the case of towns of different sizes, the regulator of the larger town is the only one that zones in an asymmetric equilibrium.     

HIGH-TECHNOLOGY JOBS AND WORKER MOBILITY*

ABSTRACT. The premise of this paper is that one can discover much about the location determinants of high-technology industry by examining the location (migration) decision of workers with high-technology occupations. A model of the high-technology worker migration decision is developed that permits estimation of worker response to both personal and area characteristics, the latter chosen to mirror location factors often cited by high-technology firms as important for both the attraction and retention of their specialized work force. Logit estimates of this model between 1975 and 1980 are presented. The paper is concluded with a discussion of policy implications.     

New Trends in Bourgeois Science on the Location of Production

The author criticies Western location theories, including those of Hoover, Ullrich, Dorpmund and Isard, on the ground that they fail to take account of the competitive aspect of what is called “monopoly capitalism.” In the author's view, even government interference is unable to insure “scientific” planning of industrial location, which is said to be possible only under Socialist conditions.     

CAN REGIONALIZATION OF LOCAL PUBLIC SERVICES INCREASE A REGION'S WEALTH?*

ABSTRACT. In the presence of agglomeration and congestion externalities the sequence of location choices made by firms results in an inefficient distribution of economic activity, since individual firms do not bear the congestion costs they impose on other firms. In this paper, we model the interaction of public authority service strategies and firm location choices. We show that a self-interested regional authority can effect a welfare-improving distribution of economic activity when compared with an economy without an authority or an economy with local authorities. However, we also show that the conditions under which the authority would induce a welfare enhancing distribution depends on the authority's strategic posture, as well as the nature and size of public subsidies for the authority. The conditions necessary for a regional authority to choose an efficiency enhancing strategy may be difficult to achieve.     

High-Tech Firms’ Location Considerations within the Metropolitan Regions and the Impact of Their Development Stages

The determinants of firms' location choice have changed over time, in particular in the high-tech industry. Few studies that investigate the factors that influence firms' location decision distinguish between firms in their early stages of life cycle and more established high-tech firms. This study identifies the considerations prioritized by high-tech firms in both categories in the process of choosing a location within a metropolitan region for establishing or relocating their business. The intra-metropolitan competition for high-tech plants was examined using data gathered through field surveys of managers of such firms in the Tel-Aviv metropolitan region. The findings shed light on the importance ascribed to internal and external factors in the decision on location made by the firms' managers.     

PRODUCTION TECHNOLOGY UNCERTAINTY AND THE OPTIMAL LOCATION OF THE FIRM*

ABSTRACT This paper investigates the implication of production-technology uncertainty for the exclusion theorem. The paper presents the result that the risk-averse firm facing production technology uncertainty prefers an intermediate location to avoid risk under certain conditions. The firm chooses an intermediate location (over a corner location) particularly if its degree of risk aversion overwhelms the inherent convexity of profit with respect to location. The latter depends, in turn, on the structure of production technology characterized by the elasticity of substitution and returns to scale parameters.     

SPATIAL COMPETITION AND THE JOINT CONSUMPTION OF SERVICES*

In Hotelling location models, an implicit assumption has been made that a customer uses the service provided by the firm, independent of other customers. However, for firms that supply meeting rooms, wedding halls, tennis courts, and golf links it is essential to incorporate the fact that the customer only uses the service in conjunction with other customers. The objective of this paper is to formulate the Hotelling location model n consideration of the interdependence among customers in one-dimensional space, and to characterize the state of equilibrium. In our model, each group of members within a given distance enjoys a fixed amount of service of the firms, under the assumption that the travel cost incurred by each group is defined as the travel cost of the farthest customer in the group.     

SPATIAL COMPETITION WITH CONSISTENT CONJECTURES*

ABSTRACT Equilibrium in spatial models invariably depends on firms' conjectures about how competitors will react to their price changes. This paper analyzes spatial price and location equilibrium when firms hold consistent (i.e. correct) conjectures. Most spatial models assume an exogenous conjecture. Consistent conjectures are one method, albeit a controversial one, for endogenizing the conjecture. We show that the consistent conjecture about a competitor's reaction to a price change in the simplest case is 1/3. When demand is elastic the consistent conjecture is a decreasing function of the radius. It is always below 1/3 and can be negative. In the third model, we show that the consistent conjecture declines as the number of dimensions and the number of competitors increases.     

FRAGMENTATION AND CLUSTERING IN VERTICALLY LINKED INDUSTRIES*

ABSTRACT This paper models the location of two vertically related firms in a low labor cost country and in a country with a large market. The upstream industry is more labor intensive than the downstream industry. We find that spatial fragmentation occurs for low values of the input‐output coefficient and intermediate values of the transport rate, particularly if the countries are very asymmetric in size. Otherwise, we obtain agglomeration either in the low cost country (when the transport rate is low) or in the large market (when the transport rate is high). Multiple agglomerated equilibria arise when the transport cost of the intermediate good is significant.     

The Strategic Choice of Location and Transport Mode in a Successive Monopoly Model

This work emphasizes the incentives for vertical integration in a spatial model. A downstream monopoly will both strategically increase its transport costs and locate inefficiently relative to its customers. This forces the upstream monopolist to lower its input price rather than permit sales to decline. The excess costs and the inefficient location lower total profit in the vertical stream generating an incentive for vertical integration.     

Teaching industrial location — secondary data: second best?

Abstract

The study of industrial location has undergone several changes of emphasis. Neo‐classical location theories have been supplemented by studies based on the locational behaviour of individual firms. In turn, the value of these has been challenged by those of a structuralist persuasion. In order to engage in the resultant academic debates in an informed way, students need to know how specific businesses use geographic space. Ways of enhancing their knowledge by linking documentary searches with group presentations and field days are described here, both in general terms and by means of a case study.     

SPATIAL PRICING IN INTERDEPENDENT MARHETS*

ABSTRACT. Conditions for spatial price equilibrium are derived for a set of firms in oligopolistic spatial competition, distributed at fixed locations in a heterogeneous region where consumer purchasing patterns are a probabilistic function of the price distribution rather than a deterministic function of proximity to firms. The resulting prices vary with accessibility to consumers or with the degree of local spatial monopoly, and result in non-zero profits for firms. Conditions describing the existence and stability properties of this spatial price equilibrium are defined, and are shown to be equivalent for two different hypotheses concerning disequilibrium pricing behavior: a partial price adjustment model and a Bertrand game. For two different profit goals, total profit maximization and profit rate maximization, it is shown that a spatial price equilibrium exists and is at least locally quasi-stable.     

When Firms Take the Lead in Facilitating Clusters

This paper focuses on the role of lead firms and their efforts to facilitate the development of clusters. Several clusters are known for the location of the lead firms that create and shape them, for example, by increasing their skill base, attracting suppliers and creating entrepreneurial activity. However, the literature suffers from insufficient dialogue on the role of lead firms as facilitators of clusters and on how the developmental differences in clusters affect the facilitation performed, and thus the benefits delivered, by lead firms. A key question then is how does the facilitation by lead firms differ in a top-down cluster from that in a bottom-up cluster? The paper is based on a comparative case study investigating the facilitating role of a lead firm within two clusters: Medicon Valley (top-down) and Mechatronics Cluster Denmark (bottom-up). The main conclusion reached is that lead firms in top-down clusters and in bottom-up clusters contribute with quite similar and overlapping cluster benefits, but the way in which these benefits are delivered differs greatly.     

The Role of Personal Factors in the Location Decision of Software Services Start-up Firms

This paper explores the factors which influence the business location decisions of start-ups, focusing in particular on the role of personal factors. Established explanations of industry location emphasize proximity to firms in the same or related industries and proximity to a wider set of business services, though recent research suggests that personal factors may play an important role in explanations of industry location—particularly in technology-enabled sectors. A survey of 97 new firms, founded between 2008 and 2012, in the Irish software services sector, shows that the business location decision is influenced by the personal motivation of entrepreneurs to attain a desired quality of life, and that this outweighs economic factors such as proximity to firms within the same or related industries, proximity to a broader set of supporting business services, infrastructure or the availability of government support schemes. Personal factors are particularly important to firms located outside the Dublin metropolitan area and to home-based businesses. This has important policy implications for national and regional governments seeking to encourage entrepreneurship in technology-enabled service sectors.     

ON THE IMPACT OF COMPETITION ON TRADE AND FIRM LOCATION

We study how the level of trade costs and the intensity of competition interact to explain the nature and intensity of trade within a given industry and the location of firms across countries. As trade costs decrease from very high to very low values, the global economy moves from autarky to two‐way trade, through one‐way trade from the larger to the smaller region. By exploring the intensive and extensive margins of exports, we investigate how the intensity of trade reacts to the degree of competitiveness. Furthermore, when firms are free to change location, they flow from the small to the large country, and the larger country is always a net exported on the manufactured good. Firms located in the big country have a bigger size than those located in the small one. Under one‐way trade, the relocation of firms changes their attitude toward export.