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Market size, competition, and entrepreneurs’ location choices

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  • Kim, Donghyuk

Abstract

This paper proposes an equilibrium model of entrepreneurs’ location choices. If larger markets are sufficiently more competitive, they attract more talented entrepreneurs than smaller markets, leading to perfect talent sorting. Simulation results show that a jurisdiction’s returns to unilaterally improving entrepreneurs’ profitability to attract entrepreneurs depend on the dispersion of talents and the resulting trade-off between market size and competition. I propose a method of deriving lower bounds on latent entrepreneurial talents and market sizes with data on entrepreneurs’ locations and market shares.

Suggested Citation

  • Kim, Donghyuk, 2023. "Market size, competition, and entrepreneurs’ location choices," Economics Letters, Elsevier, vol. 229(C).
    • Handle: RePEc:eee:ecolet:v:229:y:2023:i:c:s0165176523002288
    DOI: 10.1016/j.econlet.2023.111203
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    References listed on IDEAS

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    1. Volker Nocke, 2006. "A Gap for Me: Entrepreneurs and Entry," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 929-956, September.
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    3. Glaeser, Edward L. & Kerr, William R. & Ponzetto, Giacomo A.M., 2010. "Clusters of entrepreneurship," Journal of Urban Economics, Elsevier, vol. 67(1), pages 150-168, January.
    4. Steven Berry & Joel Waldfogel, 2010. "Product Quality And Market Size," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 1-31, March.
    5. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    6. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
    7. Katja Seim, 2006. "An empirical model of firm entry with endogenous product‐type choices," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 619-640, September.
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    Cited by:

    1. Donghyuk Kim & Byoungmin Yu, 2025. "Government incentives and firm location choices," Public Choice, Springer, vol. 203(1), pages 305-331, April.

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    More about this item

    Keywords

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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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