Strategic Location Choice under Dynamic Oligopolistic Competition and Spillovers
AbstractThis 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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Bibliographic InfoPaper 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.
Date of creation: Nov 2013
Date of revision:
Location Choice; Knowledge Spillovers; Technological Leadership; Markov-perfect Equilibrium;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-06 (All new papers)
- NEP-COM-2013-12-06 (Industrial Competition)
- NEP-CSE-2013-12-06 (Economics of Strategic Management)
- NEP-GEO-2013-12-06 (Economic Geography)
- NEP-GTH-2013-12-06 (Game Theory)
- NEP-IND-2013-12-06 (Industrial Organization)
- NEP-URE-2013-12-06 (Urban & Real Estate Economics)
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