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Small business and the self-organization of a marketplace

Author

Listed:
  • Ke Ding

    (Institute of Developing Economies - Japan External Trade Organization (IDE-JETRO))

  • Toshitaka Gokan

    (Institute of Developing Economies - Japan External Trade Organization (IDE-JETRO))

  • Xiwei Zhu

    (Zhejiang University)

Abstract

In many developing countries such as China, the typical marketplace is a cluster of small shops or booths. We investigate an economic model in which circular causality, including search and matching between buyers and sellers, forms agglomeration forces. We find that an authoritative third party that reduces search costs is important in sustaining a large marketplace. However, it is unnecessary to reduce search costs to zero. Finally, the low capital requirement of setting up a firm helps to sustain a large marketplace owing to its increased product heterogeneity.

Suggested Citation

  • Ke Ding & Toshitaka Gokan & Xiwei Zhu, 2017. "Small business and the self-organization of a marketplace," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 58(1), pages 1-19, January.
    • Handle: RePEc:spr:anresc:v:58:y:2017:i:1:d:10.1007_s00168-016-0800-7
    DOI: 10.1007/s00168-016-0800-7
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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