The Quality-Income effect and the selection of location

Emanuele Bacchiega () and Antonio Minniti ()

Journal of Urban Economics, 2009, vol. 65, issue 2, pages 209-215

Abstract: We analyze a location-choice model with two vertically differentiated firms and two regions with different consumer income. We find that the high-quality producer settles in the poor region and the low-quality one in the rich region when income disparities are sufficiently high and goods are differentiated enough. This apparently counter-intuitive result is not determined by technology or size issues; rather, it relies on the relationship between regional income disparities and product quality, which we call the "Quality-Income effect."

Keywords: Vertical; differentiation; Income; disparities; Location; Inner; city (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:juecon:v:65:y:2009:i:2:p:209-215

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