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Strategic Location Choice under Dynamic Oligopolistic Competition and Spillovers

Luca Colombo () and Herbert Dawid ()
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Herbert Dawid: Universität Bielefeld

No def001, DISCE - Working Papers del Dipartimento di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: This paper investigates firms' optimal location choices explicitly accounting for the role of inwards and outwards knowledge spillovers in a dynamic Cournot oligopoly with firms that are heterogeneous in their ability to carry out cost-reducing R\&D. Firms can either locate in an industrial cluster or in isolation. Technological spillovers are exchanged between the firms in the cluster. It is shown that a technological leader has an incentive to locate in isolation only if her advantage exceeds a certain threshold, which is increasing in firms' discount rate, in industry dispersion, and in the intensity of knowledge spillovers. Scenarios are identified where although it is optimal for the technological leader to locate in isolation, from a welfare perspective it would be desirable that she locates in the cluster.

Keywords: Location Choice; Knowledge Spillovers; Technological Leadership; Markov-perfect Equilibrium (search for similar items in EconPapers)
JEL-codes: C73 L13 O31 R12 (search for similar items in EconPapers)
Pages: 31
Date: 2013-11
New Economics Papers: this item is included in nep-com, nep-geo, nep-mic and nep-ure
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http://dipartimenti.unicatt.it/economia-finanza-def001.pdf First version, 2013 (application/pdf)

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Journal Article: Strategic location choice under dynamic oligopolistic competition and spillovers (2014) Downloads
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