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Agglomeration in a Vertically-linked Oligopoly

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  • José Pedro Pontes

Abstract

This paper examines the location of three vertically-linked firms. In a spatial economy composed of two regions, a monopolist firm supplies an input to two consumer goods firms that compete in quantities. The interaction between the firms is modelled by means of a three-stage game, where the firms first select locations, then the upstream firm chooses thedelivered prices of the intermediate good, and finally the downstream firms select quantities of the final good. It is concluded that agglomeration is more likely to occur when the ratio between the transport cost of the intermediate good and the transport cost of the final good is higher. If this proportion is low, the existence of an agglomeration varies nonmonotonically with transport costs.

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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 2004/06.

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Date of creation: 2004
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Handle: RePEc:ise:isegwp:wp62004

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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

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Keywords: Agglomeration; Intermediate Goods; Spatial Oligopoly.;

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  1. BELLEFLAMME, Paul & TOULEMONDE, Eric, . "Product differentiation in successive vertical oligopolies," CORE Discussion Papers RP -1720, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Mary Amiti, 1998. "Regional Specialisation and Technological Leapfrogging," Working Papers 1998.14, School of Economics, La Trobe University.
  3. Tjalling C. Koopmans & Martin J. Beckmann, 1955. "Assignment Problems and the Location of Economic Activities," Cowles Foundation Discussion Papers 4, Cowles Foundation for Research in Economics, Yale University.
  4. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  5. Fujita, Masahisa & Hamaguchi, Nobuaki, 2001. "Intermediate goods and the spatial structure of an economy," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 79-109, February.
  6. repec:fth:iniesr:430 is not listed on IDEAS
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