Faculty of Economics and Business Administration Publications Database

Regional Competition for Mobile Oligopolistic Firms: Does Public Provision of Local Inputs Lead to Agglomeration?

Maurer, Boris
Volume: 40
Number: 2
Pages: 353 - 375
Month: May
ISSN-Print: 0022-4146
Link External Source: Online Version
Year: 2000
Keywords: Regional economics; Oligopolies
Abstract: We develop a model in which two regional governments compete for two mobile oligopolistic firms. Regional governments provide local infrastructure to attract mobile firms in order to increase regional employment and income.Firms face the trade-off between better regional infrastructure and fiercer competition for local workers. Strategic interaction prevails at the regional level as well as at the firm level. We show that an equilibrium with spatial concentration of firms as well as an equilibrium with spatial diversification of firms exists.In almost all cases regional competition leads to a suboptimal provision of local infrastructure.