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Agglomeration in a city with choosy consumers under imperfect information

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  • Takahashi, Takaaki
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    Abstract

    The purpose of this paper is to show that taste heterogeneity and imperfect information on the characteristics of available varieties among consumers can lead to the agglomeration of commercial activities. Here, the source of agglomeration is matching. By constructing a two-region model, we show that two distribution patterns – segregation and full agglomeration – may be supported as equilibrium outcomes. Their properties closely resemble those of the equilibrium patterns in the standard new economic geography models. In addition, it is shown that the third type of equilibrium pattern – incomplete agglomeration – may emerge when consumers pay different amounts of transport cost.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Urban Economics.

    Volume (Year): 76 (2013)
    Issue (Month): C ()
    Pages: 28-42

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    Handle: RePEc:eee:juecon:v:76:y:2013:i:c:p:28-42

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    Web page: http://www.elsevier.com/locate/inca/622905

    Related research

    Keywords: Agglomeration; Break point; Characteristics cost; Differentiated product; Hotelling model; Imperfect information; Matching; Pro-competitive effect; Segregation; Spatial competition; Sustain point; Taste heterogeneity; Transport cost;

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    References

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