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Reference-Dependent Utility in an Industrial Cluster

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Author Info
Olsson, Ola () (Department of Economics, School of Economics and Commercial Law, Göteborg University)

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Abstract

This article tries to explain the exceptional levels of knowledge creation in certain industrial clusters, levels that are seemingly higher than what is implied by the usual models of atomistic agents who do not internalize externalities. For this purpose, we introduce reference-dependent utility into an OLG model of an industrial cluster where agents allocate resources between consumption and knowledge investments and where the latter spills over to the rest of the cluster. It is shown that if the agents in the cluster have altruistic preferences, they will internalize the externalities from knowledge investments and create more knowledge than if they were atomistic or considered their neighbors to be rivals.

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File URL: http://hdl.handle.net/2077/2804
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Publisher Info
Paper provided by Göteborg University, Department of Economics in its series Working Papers in Economics with number 87.

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Length: 15 pages
Date of creation: 09 Jan 2003
Date of revision: 30 Jun 2003
Publication status: Forthcoming in Knowledge Spillover and Knowledge Management. , Karlsson, C., Flensburg, P., Hörte, S. (eds.), Lawrence Erlbaum.
Handle: RePEc:hhs:gunwpe:0087

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Postal: Department of Economics, School of Business, Economics and Law, Göteborg University Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research
Keywords: industrial cluster; reference-dependent utility; knowledge spillovers; relative consumption;

Find related papers by JEL classification:
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
R30 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October. [Downloadable!] (restricted)
  2. Christopher D Carroll & Jody Overland & David N Weil, 1997. "Comparison Utility in a Growth Model," Economics Working Paper Archive 387, The Johns Hopkins University,Department of Economics.
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  3. Harbaugh, Richmond, 1996. "Falling behind the Joneses: relative consumption and the growth-savings paradox," Economics Letters, Elsevier, vol. 53(3), pages 297-304, December. [Downloadable!] (restricted)
  4. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March. [Downloadable!] (restricted)
  5. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March. [Downloadable!] (restricted)
  6. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2001. "The Economic Approach to Social Capital," Harvard Institute of Economic Research Working Papers 1916, Harvard - Institute of Economic Research. [Downloadable!]
    Other versions:
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