Competition by Choice: The Effect of Consumer Search on Firm Location Decisions

Marc Dudey ()

American Economic Review, 1990, vol. 80, issue 5, 1092-1104

Abstract: This paper relates firm location choice and consumer search. Firms that cluster together attract consumers by facilitating price comparison, but clustering increases the intensity of local competition. The author constructs a simple model which shows that firms may choose head-on competition by locating together. Under reasonable conditions, this is the only equilibrium outcome. Copyright 1990 by American Economic Association.

Date: 1990
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