Agglomeration and the Extent of the Market: An Experimental Investigation into Spatially Coordinated Exchange
Working Papers from Chapman University, Economic Science Institute
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)
New Economics Papers: this item is included in nep-agr, nep-exp and nep-geo
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:18-12
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