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Production-location decision under duopoly with managerial incentives


  • Lin-Ti Tan

    () (Institute of Economics, Academia Sinica, Taipei 115, Taiwan)


The validity of the profit-maximizing assumption has long been doubted by many economists. One reason for the deviation from profit maximization that has been emphasized is the separation of ownership and management. This paper attempts to examine the spatial consequences of this separation under duopoly where managers compete in quantities, as in the Cournot model, and owners choose their managers' incentives and plant locations. A complete analysis, including the exclusion theorem, comparisons of optimal locations under the incentive equilibrium with those under profit-maximization, and comparative statics, is provided. It is demonstrated that the separation of ownership and management has significant implications for firms in relation to their location decisions.

Suggested Citation

  • Lin-Ti Tan, 2002. "Production-location decision under duopoly with managerial incentives," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 36(1), pages 41-54.
  • Handle: RePEc:spr:anresc:v:36:y:2002:i:1:p:41-54
    Note: Received: October 2000/Accepted: August 2001

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General


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