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The Location Invariance Theorem in Weberian Space Under Uncertainty

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  • Lin‐Ti Tan
  • Song‐Ken Hsu

Abstract

This paper examines the validity of the location invariance theorem in Weberian space under various types of uncertainty. The main results are: Given that the firm's location is constrained to remain at a specified distance from the output market, the optimal location is invariant to any change in product demand if and only if the production function is homothetic for a firm facing demand price uncertainty, or if the production function is homothetic and both inputs are risk‐neutral for a firm facing technological uncertainty. Alternatively, given that the distance from the firm's location to the output market is a variable, location invariance occurs for a firm facing demand price uncertainty if the production function is linear homogeneous. In the presence of input price uncertainty the optimal location always varies with a change in product demand. The results can include those previously obtained for linear stochastic location models as special cases and some are new contributions to the literature.

Suggested Citation

  • Lin‐Ti Tan & Song‐Ken Hsu, 2001. "The Location Invariance Theorem in Weberian Space Under Uncertainty," Journal of Regional Science, Wiley Blackwell, vol. 41(1), pages 97-116, February.
    • Handle: RePEc:bla:jregsc:v:41:y:2001:i:1:p:97-116
    DOI: 10.1111/0022-4146.00209
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