Quantity-Discounted Transportation Rates, Location, and the Theory of Production

J P O'Brien and Yeung-Nan Shieh ()
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J P O'Brien: Department of Economics, School of Management, University of Alaska Fairbanks, Fairbanks, AK 99775-0580, USA

Environment and Planning A, 1990, vol. 22, issue 11, 1487-1496

Abstract: The theoretical impacts and implication of quantity-discounted transportation rates on the optimum location decisions of the firm in the linear space are investigated. It is shown that the linearly homogeneous or homothetic production function alone no longer ensures the independence between the choice of plant location and the output level or the demand condition, unless (1) the elasticities of transportation rates with respect to quantity are constant and identical; and (2) the ratio of marginal products is equal to the ratio of marginal transportation costs. Moreover, and more importantly, some conclusions obtained by prior studies on location theory can be shown to be special cases of these more general results, but others are not defensible when the transportation rate depends upon quantity shipped.

Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:sae:envira:v:22:y:1990:i:11:p:1487-1496

DOI: 10.1068/a221487

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