Regional Competition for the location of new facilities

Thomas Christiaans ()

Volkswirtschaftliche Diskussionsbeiträge from Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht

Abstract: A model of interregional competition for the location of new (production) facilities by a location decision maker (LDM) is analyzed as a differential game. Two regions try to enhance their attraction by making concessions to the LDM in order to raise the probability that a new facility will be located in a specific region, the benefit of which consists of the number of new jobs, new income etc. It is shown that the prospective benefits and costs of exerting influence are decisive for the final outcomes of the model. The open-loop Nash equilibrium solution -- which is also a degenerate feedback solution due to the simple structure of the model -- is likely to be inefficient in comparison with the cooperative solution of joint benefit maximization of both regions.

Keywords: Differential Game; Location Theory; Regional Competition (search for similar items in EconPapers)
JEL-codes: C73 R38 (search for similar items in EconPapers)
Date: 1999
New Economics Papers: this item is included in nep-mic and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:sie:siegen:75-99

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