A Comment on Location and Industrial Efficiency with Free Entry

B. Eaton (eaton@ucalgary.ca) and Richard Lipsey (rlipsey@sfu.ca)

Working Paper from Economics Department, Queen's University

Abstract: We consider Gee's model of industrial location and prove analytically that, given Gee's assumption of price discrimination, firms always wish to locate in the centres of their markets. This contrasts the result for mill-price-plus-transport-cost pricing where firm locate in the centres of interior markets, but not in the centres of peripheral markets. We also show that other of Gee's results depend on his omission of a key equilibrium condition with respect to the relocation of firms already in the market. We reassert the propositions challenged by Gee, that pricing behaviour and the existence or non-existence of boundaries to the whole market critically affect the results derived from a broad class of industrial location models.

Pages: 17
Date: 1977
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