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.     

东北老工业基地信息化战略研究

以信息化带动工业化,以工业化促进信息化,是我国今后二十年内实现工业化的必由之路,今年是实施信息化带动工业化战略的启动年,东北地区是我国重要的老工业基地,本文以东北老工业基地作为实证研究,提出东北老工业基地信息化发展战略,对于研究信息化带动工业化的战略具有典型意义。     

EXPLORING LOCATIONAL EQUILIBRIA IN A COMPETITIVE BROADBAND ACCESS MARKET: THEORETICAL MODELING APPROACH

ABSTRACT Due to strong local competition in the broadband access market, strategic locational planning is very important for service providers. In this paper, we explore locational equilibria in a competitive broadband market under several situations: with and without customer loyalty and under different initial market conditions. To do this, we propose a competitive broadband location model based on probabilistic patronage behavior, explicitly considering the characteristics of the broadband market and competitive structures. Also, we suggest iterative algorithms to identify spatial equilibria. We show that competing location strategies may lead to a stable spatial configuration of market share.     

THE EFFECTS OF ZONING IN SPATIAL COMPETITION

ABSTRACT This paper considers a location model to illustrate the effect of zoning on competition. A planner is in charge of designing a city in a circular space where firms and consumers are located on different sides. With this type of market configuration, equilibrium in location under concave transport costs is proved. Then, a welfare function with different weights attached to consumer and firm surpluses is introduced to highlight zoning regulation as an influential competition policy tool. Depending on the regulator's political profiles and the demand, it is shown that zoning can lead to strong, weak, or moderate competition.     

LOCATING A SINGLE NEW FACILITY AMONG EXISTING,UNEQUALLY ATTRACTIVE FACILITIES*

ABSTRACT. The location of a new facility in a competitive environment is investigated. It is assumed that customers patronize the facility with the highest utility value rather than the closest facility. Simulations show that the new approach yields a superior location in terms of market size captured. Sensitivity analyses of the problem parameters illustrate the sensitivity of the location and the sensitivity of the market size captured to the facility's quality.     

THE SCOPE FOR PURE PROFITS IN A STANDARD LOCATION MODEL*

ABSTRACT. This paper examines the possibility of sustaining a collusive equilibrium in a standard location model. Drawing on recent developments in game theory, it is suggested that collusion is only feasible if market areas lie within a certain range. When market areas are large the threat of entry is likely to undermine any collusive agreement. In contrast when market areas are small, defection from the cartel is shown to be profitable. Thus collusion is shown to be feasible only when market areas and demand lie within certain bounds. More generally, this result appears to be consistent with the somewhat ambiguous empirical evidence which suggests that competitive pricing behavior is likely to prevail in periods of excessively high demand and during recessions.     

构建汽车产业区位竞争优势——以长春市为例

区位建立竞争优势才能主动迎接经济全球化的挑战,由此,本文提出"区位竞争优势"这一概念。中国正处于工业社会向知识经济社会的转型过程中,制造业所需的区位竞争优势内容具有两种社会的交叉特点,极富代表性。本文选取受跨国公司影响巨大的汽车产业为分析对象,将区位竞争优势的内容分析落实到具体的产业;并以长春市为例,对条件并非最好的区位提出构建区位竞争优势的思路。     

The Location Invariance Theorem in Weberian Space Under Uncertainty

This paper examines the validity of the location invariance theorem in Weberian space under various types of uncertainty. The main results are: Given that the firm's location is constrained to remain at a specified distance from the output market, the optimal location is invariant to any change in product demand if and only if the production function is homothetic for a firm facing demand price uncertainty, or if the production function is homothetic and both inputs are risk-neutral for a firm facing technological uncertainty. Alternatively, given that the distance from the firm's location to the output market is a variable, location invariance occurs for a firm facing demand price uncertainty if the production function is linear homogeneous. In the presence of input price uncertainty the optimal location always varies with a change in product demand. The results can include those previously obtained for linear stochastic location models as special cases and some are new contributions to the literature.     

ON THE RELATION BETWEEN USERS' BENEFITS AND THE ECONOMIC EFFECTS OF TRANSPORTATION ACTIVITIES

ABSTRACT. The addition of output variation benefits to the users' surplus generated by transportation improvements has been subject to debate, and no agreement has been reached. In this paper, the problem is restated at the level of the origins of transportation demand, which can be derived from the information provided by the economic activity. It is shown that a competitive productive environment makes the transportation consumers' surplus exactly equal to the net economic benefits provoked in the products' markets; however, when monopolistic production prevails, the users' surplus may not reflect the benefits to the economy with accuracy. Mixed conditions are also explored and the role of final products' demand elasticity is highlighted. Different styles of welfare analysis are recommended for different market conditions.     

On the Logit Approach to Competitive Facility Location

The random utility model in competitive facility location is one approach for estimating the market share captured by a retail facility in a competitive environment. However, it requires extensive computational effort for finding the optimal location for a new facility because its objective function is based on a k -dimensional integral. In this paper we show that the random utility model can be approximated by a logit model. The proportion of the buying power at a demand point that is attracted to the new facility can be approximated by a logit function of the distance to it. This approximation demonstrates that using the logit function of the distance for estimating the market share is theoretically founded in the random utility model. A simplified random utility model is defined and approximated by a logit function. An iterative Weiszfeld-type algorithm is designed to find the best location for a new facility using the logit model. Computational experiments show that the logit approximation yields a good location solution to the random utility model.     

A real options approach to amenity valuation: The role of uncertainty and risk aversion

Many empirical studies in the fields of urban and environmental economics rely on the hedonic pricing framework. This paper draws attention to two important elements that are not covered by this theory: uncertainty and relocation costs. It develops a theoretical model where agents face uncertainty, but may accumulate savings as a form of self‐insurance. It shows that uncertainty pushes up relocation costs due to the option value of waiting, while self‐insurance helps to reduce this lock‐in problem. Moreover, the model suggests that the implicit price of environmental quality increases with uncertainty even if agents are risk‐neutral.     

THE LOGISTICS-COST LOCATION-PRODUCTION PROBLEM*

ABSTRACT. The paper applies an inventory model to the standard Weber-Moses location-production problem. By setting the problem within a time framework, costs are seen to be incurred by both the holding of goods and the shipment of goods. The optimum location of the firm is seen to depend not only on transportation costs and the nature of the firm's production function, but also on the value of the materials being shipped. Under these conditions there is no homogeneous solution to the Weber-Moses problem. Furthermore, it is shown that the value added at the point of production is the primary factor which governs the optimum location of the firm.     

Transport Costs and Rural Development

Innovations that reduce costs of transport from rural locations may also reduce transport costs to rural areas. As transport costs fall, producers can afford to concentrate and achieve economies of scale. This paper explains an initially negative, but ultimately positive, relationship between reductions in transport costs and rural development. A two-region general equilibrium model with firm and worker spatial mobility highlights the firm and household location implications of costly transport-service use by both industry and agriculture in the context of scale economies and product differentiation. The computable general equilibrium model is initialized and verified with a bi-regional social accounting matrix and then used for simulations. Changes in relative transport costs are shown to affect relative regional wage rates, thus also determining the location of "production-cost-oriented" firms.     

Surviving in a Competitive Spatial Market: The Threshold Capture Model

Many facility location decision models ignore the fact that for a facility to survive it needs a minimum demand level to cover costs. In this paper we present a decision model for a firm that wishes to enter a spatial market where there are several competitors already located. This market is such that for each outlet there is a demand threshold level that has to be achieved in order to survive. The firm wishes to know where to locate its outlets so as to maximize its market share taking into account the threshold level. It may happen that due to this new entrance, some competitors will not be able to meet the threshold and therefore will disappear. A formulation is presented together with a heuristic solution method and computational experience.     

CENTER POINTS, EQUILIBRIUM POSITIONS, AND THE OBNOXIOUS LOCATION PROBLEM

ABSTRACT. Real variable analysis has een used to great benefit in a variety of classical problems in location theory. In this paper we explore basic complex variable techniques in one formulation of the obnoxious location problem. A general definition of center points is first given and used to formulate several alternate versions of the obnoxious location problem. A logarithmic transformation is then used to demonstrate some equivalences between these families of distinct location problems (defined via center points). A prototype logarithmic potential function which results from this formulation is then investigated, and it is demonstrated that the extremal solutions with this objective reside on the boundary of its domain of definition. An application using zero- and one-dimensional centers is discussed, and a generalization to the spatial obnoxious problem is also briefly examined. We define a zero-dimensional center as a critical point of the logarithmic potential function, and it is shown that these centers are equivalent to the solutions of the Complex Moment Problem.     

中国科技园区位布局探析--以西安科技园区为例

科技园区是20世纪高技术产业化方面最重要的创举,创建科技园区以发展高技术产业已成为国际趋势。国内外研究表明,科技园区成功的关键的因素之一是区位布局,一般只有大城市的区位条件,才能为高技术企业的技术创新提供各种聚集经济条件。因而科技园区必然在城市化地区首先出现。但国内外科技园区的实践证明,这一结论没有普遍性。本分析了科技园区布局的一般规律,并以西安科技园区位布局为例作分析验证,以期为科技园区的布局提供科学依据。     

FIRST NATURE, SECOND NATURE, AND METROPOLITAN LOCATION

ABSTRACT. Economies of scale, transportation costs, and factor mobility can interact to produce agglomerations even in the absence of any pure external economies. This paper offers a monopolistic competition model of a city that serves an agricultural hinterland; unlike most analyses in location theory, the model is fully general equilibrium, but it has strong links to older concepts in geography, notably the idea of "market potential." The analysis shows that the forward and backward linkages that hold a population concentration together also allow that concentration to occur in a variety of possible sites—that is, there are multiple equilibria (indeed a continuum) for metropolitan location.     

OPTIMALITY OF RECYCLING AND THE LOCATION OF A RECYCLING CENTER

ABSTRACT. Consider a community investigating the integration of recycling into its waste management program. Even if (1) the county's citizens do not gain utility from recycling, (2) landfill space is plentiful, and (3) the market price for recyclables is zero, recycling can still be optimal for a local government. By determining the relationship between the amount of recycling and the location of a recycling center, conditions are identified under which recycling will reduce total waste management costs enough that municipal recycling will be optimal. In addition, it is shown that the likelihood of municipal recycling increases with the size of the city.     

Marketing as Diffusion in a Single Population

The paper examines the optimal advertising policy for a profit-maximizing firm in a single market area. The results are first derived for a spaceless market, indicating the steady-state equilibrium advertising policy and market size. The model is then extended to account for the costs of overcoming distance. It is shown that there is an outward limit to marketing, and that this distance is dependent on the market price and retirement rate of the good and the interest rate. The minimal price necessary for covering any given distance is derived, along with the minimal advertising effort necessary to reach the steady-state market size. It is shown that the steady-state market size, advertising policy, and switching time are all monotonic functions of distance.     

PRICING POLICY REACTIONS TO AGGLOMERATION IN A MARKET WITH SPATIAL SEARCH*

ABSTRACT. Price dispersion (variation) and agglomeration are common characteristics of spatial markets, in particular, markets with imperfect consumer information and search. However, pricing and location strategies in these markets are not well analyzed since spatial search is difficult to model without restricting the spatial dimension of the problem. This paper analyzes pricing and location strategies in a market with spatid search using a probabilistic modeling strategy that does not restrict search patterns in the plane. Specifically, the analysis considers the pricing strategy of an isolated firm in response to the agglomeration of competing firms. Results indicate that spatial and temporal price dispersion are effective responses to competitors'agglomeration. However, the relative effectiveness of these strategies varies with market conditions. In addition, agglomeration can have some counterintuitive effects. This paper also provides insights into existing theories of spatial search and spatial competition in spatially-restricted (linear and circular) markets.