Location of Upstream and Downstream Industries
This paper studies the issue of agglomeration versus fragmentation of vertically related industries. While the downstream industry works under perfect competition, the upstream industry is a duopoly where each firm supplies a differentiated input to the competitive firms. These process the inputs under a quadratic production function entailing decreasing returns as in PENG, THISSE and WANG (2006). It is found that fragmentation occurs if the transport cost of final goods is medium to high, while the transport cost of inputs is low. Otherwise, agglomeration prevails. Multiple agglomerated equilibria are possible if the transport cost of intermediate goods is either medium or high.
|Date of creation:||Mar 2008|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL|
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC
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- Peng, Shin-Kun & Thisse, Jacques-Francois & Wang, Ping, 2006.
"Economic integration and agglomeration in a middle product economy,"
Journal of Economic Theory,
Elsevier, vol. 131(1), pages 1-25, November.
- Peng, Shin-Kun & Thisse, Jacques-François & Wang, Ping, 2004. "Economic Integration and Agglomeration in a Middle Product Economy," CEPR Discussion Papers 4441, C.E.P.R. Discussion Papers.
- Shin-Kun Peng & Jacques-François Thisse & Ping Wang, 2005. "Economic Integration and Agglomeration in a Middle Product Economy," IEAS Working Paper : academic research 05-A006, Institute of Economics, Academia Sinica, Taipei, Taiwan.
- PENG, Shin-Kun & THISSE, Jacques-Françiois & WANG, Ping, . "Economic integration and agglomeration in a middle product economy," CORE Discussion Papers RP 1878, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- PENG, Shin-Kun & THISSE, Jacques-François & WANG, Ping, 2004. "Economic integration and agglomeration in a middle product economy," CORE Discussion Papers 2004015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Amiti, Mary, 2005.
"Location of vertically linked industries: agglomeration versus comparative advantage,"
European Economic Review,
Elsevier, vol. 49(4), pages 809-832, May.
- Amiti, Mary, 2001. "Location of Vertically Linked Industries: Agglomeration versus Comparative Advantage," CEPR Discussion Papers 2800, C.E.P.R. Discussion Papers.
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