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Agglomeration and the Extent of the Market: An Experimental Investigation into Spatially Coordinated Exchange

Jordan Adamson

Working Papers from Chapman University, Economic Science Institute

Abstract: How and why do agglomerations emerge? While economic historians emphasize trade and economic geographers emphasize variety, we still don’t understand the role of coordination. I fill this gap by extending the model of Fudenberg and Ellison (2003) to formalize Smith’s (1776) theory of agglomeration. I then test the model in a laboratory experiment and find individuals tend to coalesce purely to coordinate exchange, with more agglomeration when there is a larger variety of goods in the economy. I also find that tying individuals to the land reduces agglomeration, but magni?es the effect of variety.

Keywords: Spatial Coordination; Agglomeration; Pure-Exchange (search for similar items in EconPapers)
JEL-codes: C92 F19 R12 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-agr, nep-exp and nep-geo
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Handle: RePEc:chu:wpaper:18-12