Location of Upstream and Downstream Industries

José Pontes

No 2008/30, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: 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.

Keywords: Oligopoly; Vertically-Linked Firms; Location; Spatial Fragmentation. (search for similar items in EconPapers)
JEL-codes: L13 R10 (search for similar items in EconPapers)
Date: 2008-03
New Economics Papers: this item is included in nep-bec, nep-com, nep-geo, nep-ind, nep-mic and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp302008

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More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
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