SPATIAL EQUILIBRIUM WITH FOOTLOOSE FIRMS*

ABSTRACT. We determine the location equilibria in a duopoly model under a novel solution concept. Typically, spatial equilibrium is described as either a simultaneous price and location game, or else as a two-stage location-then-price game. We introduce a new alternative, a two-stage price-then-location game. It is well known that no (pure strategy) equilibrium usually exists under the two standard solution concepts when products are homogeneous. We show this is also true for the new concept. We then provide numerical results for a specific functional form (the logit model) which introduces product heterogeneity into the standard framework, restoring equilibrium when the degree of substitutability between products is not too small.     

Trading places: Quentovic and Dorestad reassessed

In any list of Carolingian emporia, Quentovic and Dorestad feature prominently, yet the numismatic evidence reveals a complete contrast between the two. In the late eighth and early ninth centuries, contrary to popular belief, Quentovic was of very little economic significance. At the same time, Dorestad was booming, reaching the peak of its prosperity around 820. Only thirty years later, the situation was dramatically reversed: Dorestad rapidly declined and disappeared, while Quentovic enjoyed a remarkable renaissance. This challenges the current theory that the emporia disappeared in the mid-ninth century, to be replaced by the emerging towns.