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Cournot Competition, Market Size Effects, and Agglomeration

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  • Gallo, Fredrik

    ()
    (Department of Economics, Lund University)

Abstract

We analyse a two-stage location-quantity game with many firms and two regions. We show that the firms will never agglomerate in the same location if transportation is costly between the regions. We also analyse the effects of differences in market size and economic integration on the allocation of industrial activity. For high levels of trade costs firms locate in different regions. Lowering the trade costs beyond a critical level triggers an agglomeration of industry in the larger region. This process of agglomeration is gradual in nature and trade costs have to be successively lowered for a full-scale agglomeration to take place.

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File URL: http://project.nek.lu.se/publications/workpap/Papers/WP05_23.pdf
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Bibliographic Info

Paper provided by Lund University, Department of Economics in its series Working Papers with number 2005:23.

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Length: 44 pages
Date of creation: 11 Mar 2005
Date of revision:
Handle: RePEc:hhs:lunewp:2005_023

Contact details of provider:
Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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Keywords: agglomeration; cross-hauling; market size effects; spatial Cournot competition;

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