TRANSPORTATION RATES AND LOCATION OF THE FIRM: A COMPARATIVE STATIC ANALYSIS*

ABSTRACT This paper examines the role of the structure of transportation rates in the Weber-Moses triangle model. It shows that, in Zeigler's analysis, the appearance of the price elasticities of demand for inputs actually vanish by a simple application of the envelope theorem. Applying comparative statics analysis, we show when transportation rates are a function of quantity and distance, the assumptions that the production function is homogeneous of degree one and the transportation rates elasticities with respect to quantity and distance are constant are not sufficient to insure that the optimum location is independent of the level of output. This result is significantly different from that obtained by either Miller and Jensen or Zeigler.