Market size, competition, and entrepreneurs’ location choices

Donghyuk Kim

Economics Letters, 2023, vol. 229, issue C

Abstract: This paper proposes an equilibrium model of entrepreneurs’ location choices. If larger markets are sufficiently more competitive, they attract more talented entrepreneurs than smaller markets, leading to perfect talent sorting. Simulation results show that a jurisdiction’s returns to unilaterally improving entrepreneurs’ profitability to attract entrepreneurs depend on the dispersion of talents and the resulting trade-off between market size and competition. I propose a method of deriving lower bounds on latent entrepreneurial talents and market sizes with data on entrepreneurs’ locations and market shares.

Keywords: Location choice; Market structure; Competition (search for similar items in EconPapers)
JEL-codes: L1 R3 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:229:y:2023:i:c:s0165176523002288

DOI: 10.1016/j.econlet.2023.111203

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