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A Geographic Game with Intermediate Goods

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  • José Pedro Pontes

Abstract

The paper treats a noncooperative game where an upstream firm and two downstream firms select locations in a spatial system made by two asymmetric countries. The location of the upstream firm is indeterminate and it is assigned to the smaller country, in order to avoid triviality of the location problem. The Nash equilibria of locations of the downstream firms is characterized in the parameter space (coefficient of input transactions, transport cost) although not everywhere uniquely. Keeping the degree of technological interdependency high, economic integration, as measured by the decline of transport costs, shifts production from the country where the input is produced to the larger country. In opposition, keeping transport costs low, technical progress, as measured by the intensity of input transactions, shifts production from the large market to the country where the input is produced.

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File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp102001.pdf
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Bibliographic Info

Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2001/10.

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Date of creation: 2001
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Handle: RePEc:ise:isegwp:wp102001

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Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

Related research

Keywords: Noncooperative games; Location; Intermediate Goods; New Economic Geography..;

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