| Abstract: | ABSTRACT. This paper develops a model of firm location choice based on managerial theory of discretionary behavior. Specifically, it is assumed that the management of the firm maximizes a utility function which incorporates profits and location-specific amenities. As the firm moves from one prospective location to another, it faces a profit-amenity constraint imposed by market conditions. The optimal location decision is derived by maximizing the utility function subject to this market-imposed constraint. After examining the properties of the optimal solution, the impact of various changes in product market structure (including changes from a contestible markets perspective) on the location decision is investigated. A major finding is that the impact of a change in market structure depends upon the nature of the structure change and upon the substitution and income effects induced by the structural change. |
