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Strategic Location Choice under Dynamic Oligopolistic Competition and Spillovers

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  • Luca Colombo

    ()
    (Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)

  • Herbert Dawid

    ()
    (Universität Bielefeld)

Abstract

This paper investigates firms' optimal location choices explicitly accounting for the role of inwards and outwards knowledge spillovers in a dynamic Cournot oligopoly with firms that are heterogeneous in their ability to carry out cost-reducing R\&D. Firms can either locate in an industrial cluster or in isolation. Technological spillovers are exchanged between the firms in the cluster. It is shown that a technological leader has an incentive to locate in isolation only if her advantage exceeds a certain threshold, which is increasing in firms' discount rate, in industry dispersion, and in the intensity of knowledge spillovers. Scenarios are identified where although it is optimal for the technological leader to locate in isolation, from a welfare perspective it would be desirable that she locates in the cluster.

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File URL: http://dipartimenti.unicatt.it/economia-finanza-def1.pdf
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Bibliographic Info

Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Working Papers del Dipartimento di Economia e Finanza with number def1.

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Length: 31
Date of creation: Nov 2013
Date of revision:
Handle: RePEc:ctc:serie1:def1

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Related research

Keywords: Location Choice; Knowledge Spillovers; Technological Leadership; Markov-perfect Equilibrium;

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References

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  1. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
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  14. repec:fth:iniesr:430 is not listed on IDEAS
  15. Petit, Maria-Luisa & Sanna-Randaccio, Francesca, 2000. "Endogenous R&D and foreign direct investment in international oligopolies," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 339-367, February.
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Cited by:
  1. Mattia Guerini, 2013. "Is the Friedman Rule Stabilizing? Some Unpleasant Results in a Heterogeneous Expectations Framework," DISCE - Working Papers del Dipartimento di Economia e Finanza def3, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  2. Tiziana Assenza & Jakob Grazzini & Cars Hommes & Domenico Massaro, 2014. "PQ Strategies in Monopolistic Competition: Some Insights from the Lab," DISCE - Working Papers del Dipartimento di Economia e Finanza def11, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  3. Russel Davidson & Andrea Monticini, 2014. "Heteroskedasticity-and-Autocorrelation-Consistent Bootstrapping," DISCE - Working Papers del Dipartimento di Economia e Finanza def12, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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