Imitation in location choice

Nathan Berg

MPRA Paper from University Library of Munich, Germany

Abstract: Under the assumption of perfect competition, it is difficult to avoid the conclusion that abandoned properties and long undeveloped neighborhoods remain that way because they are unprofitable. In contrast, this paper introduces a model in which firms systematically overlook neighborhoods with little commercial activity because of a positive informational externality motivating later movers to condition choice of location on earlier movers’ locations. When this occurs, firms sometimes find it profitable to imitate early movers’ locations even though privately acquired information suggests locating elsewhere. The model facilitates normative analysis of imitation in location choice by explicitly quantifying losses in aggregate efficiency following a shift from centralized to decentralized regimes. The model provides a tool for investigating the hypothesis of inefficient lock-in as it relates to neighborhoods in U.S. urban centers that remain underutilized despite the presence of profitable business prospects.

Keywords: Imitation; Location; Ecological Rationality; Bounded Rationality; Lock-In; Neighborhood; Abandoned (search for similar items in EconPapers)
JEL-codes: D03 D21 D61 L20 R14 R30 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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