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A Note on Consumer Search, Firm Location Choice, and Welfare

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  • Dudey, Marc

Abstract

Although geographical concentrations of retail firms facilitate search, such concentrations also increase wasteful travel by consumers. An elementary example shows that (1) it may be impossible for a planner to achieve the first best level of surplus by simply assigning firms to locations and (2) market forces may necessarily lead to clustering when this is even worse than the planner's solution. A modification of the example shows that market forces can result in firms' always locating apart when clustering is the most efficient configuration of firms. Copyright 1993 by Blackwell Publishing Ltd.

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  • Dudey, Marc, 1993. "A Note on Consumer Search, Firm Location Choice, and Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 41(3), pages 323-331, September.
    • Handle: RePEc:bla:jindec:v:41:y:1993:i:3:p:323-31
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    Cited by:

    1. Helsley, Robert W. & Strange, William C., 2007. "Agglomeration, opportunism, and the organization of production," Journal of Urban Economics, Elsevier, vol. 62(1), pages 55-75, July.
    2. Berg, Nathan, 2008. "Imitation in location choice," MPRA Paper 26592, University Library of Munich, Germany.
    3. Non, Marielle, 2010. "Isolation or joining a mall? On the location choice of competing shops," MPRA Paper 20044, University Library of Munich, Germany.
    4. Konishi, Hideo, 2005. "Concentration of competing retail stores," Journal of Urban Economics, Elsevier, vol. 58(3), pages 488-512, November.
    5. Camacho-Cuena, Eva & Garcia-Gallego, Aurora & Georgantzis, Nikolaos & Sabater-Grande, Gerardo, 2005. "Buyer-seller interaction in experimental spatial markets," Regional Science and Urban Economics, Elsevier, vol. 35(2), pages 89-108, March.

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