Product Variety and Firm Agglomeration
AbstractFor the purpose of explaining interindustry variation in the geographic distribution of firms, we explore the impact of product heterogeneity on the incentives for firms to cluster in the presence of a ubiquitous "periphery" of stand-alone firms. Our analysis revolves around two counteracting forces. Greater product heterogeneity increases consumer search, which raises the amount of shopping at a cluster. Since this results in greater demand for a firm that joins the cluster, this effect increases the incentive to cluster. However, greater product heterogeneity gives stand-alone firms more local monopoly power. Since this raises their price-cost margins, this effect increases the incentive for a firm to stand alone. Our analysis shows that the former effect typically dominates, so that greater firm agglomeration is associated with industries characterized by greater product heterogeneity.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 27 (1996)
Issue (Month): 2 (Summer)
Contact details of provider:
Web page: http://www.rje.org
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.