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Networks and Firm Location

  • José Pedro Pontes

This paper models the decision of vertically-linked firms to build either partitioned or connected networks of supply of an intermediate good. In each case, the locations of upstream and downstream firms are correlated. Input specificity is related both to variable costs (transport costs of the input) and fixed costs (learning costs of the use of the input). When both are low, a connected network emerges and a partitioned pattern arises in the opposite case. In the boundary region, there are multiple equilibria, either asymmetric (mixed network) or symmetric.

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File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp092006.pdf
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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2006/09.

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Date of creation: 2006
Date of revision:
Handle: RePEc:ise:isegwp:wp92006
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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  1. BELLEFLAMME, Paul & TOULEMONDE, Eric, . "Product differentiation in successive vertical oligopolies," CORE Discussion Papers RP -1720, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Norman, George & Thisse, Jacques-Francois, 1999. "Technology Choice and Market Structure: Strategic Aspects of Flexible Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 345-72, September.
  3. Williamson, Oliver E, 1981. "The Modern Corporation: Origins, Evolution, Attributes," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1537-68, December.
  4. Oliver Lorz & Matthias Wrede, 2008. "Standardization of intermediate goods and international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 517-536, May.
  5. Rachel E. Kranton & Deborah F. Minehart, 2000. "Networks versus Vertical Integration," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 570-601, Autumn.
  6. Curtis Eaton, B. & Schmitt, N., 1991. "Flexible Manufacturing and Market Structure," Papers 1991-02, Tasmania - Department of Economics.
  7. Choi, J.P. & Yi, S.S., 1997. "Vertical Foreclosure with the Choice of Input Specifications," Discussion Paper 1997-16, Tilburg University, Center for Economic Research.
  8. Andrea Bonaccorsi & Paola Giuri, 2000. "The long term evolution of vertically-related industries," LEM Papers Series 2000/01, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  9. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-85, March.
  10. Jose Pedro Pontes, 2005. "Input Specificity and Location," Working Papers Department of Economics 2005/01, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
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