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Imitation in location choice

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  • Berg, Nathan

Abstract

Under the assumption of perfect competition, it is difficult to avoid the conclusion that abandoned properties and long undeveloped neighborhoods remain that way because they are unprofitable. In contrast, this paper introduces a model in which firms systematically overlook neighborhoods with little commercial activity because of a positive informational externality motivating later movers to condition choice of location on earlier movers’ locations. When this occurs, firms sometimes find it profitable to imitate early movers’ locations even though privately acquired information suggests locating elsewhere. The model facilitates normative analysis of imitation in location choice by explicitly quantifying losses in aggregate efficiency following a shift from centralized to decentralized regimes. The model provides a tool for investigating the hypothesis of inefficient lock-in as it relates to neighborhoods in U.S. urban centers that remain underutilized despite the presence of profitable business prospects.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26592.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:26592

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Related research

Keywords: Imitation; Location; Ecological Rationality; Bounded Rationality; Lock-In; Neighborhood; Abandoned;

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References

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Cited by:
  1. Berg, Nathan & Murdoch, James, 2008. "Access to grocery stores in Dallas," MPRA Paper 26585, University Library of Munich, Germany.
  2. Aurélie Bonein & Stéphane Turolla, 2007. "Sequential Location under one-sided Demand Uncertainty," Working Papers 07-12, LAMETA, Universtiy of Montpellier, revised Nov 2007.

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