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Regional Competition for Mobile Oligopolistic Firms: Does Public Provision of Local Inputs Lead to Agglomeration?

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  • Boris Maurer
  • Uwe Walz

Abstract

We develop a model in which two regional governments compete for two mobile oligopolistic firms. Regional governments provide local infrastructure to attract mobile firms in order to increase regional employment and income. Firms face the trade‐off between better regional infrastructure and fiercer competition for local workers. Strategic interaction prevails at the regional level as well as at the firm level. We show that an equilibrium with spatial concentration of firms as well as an equilibrium with spatial diversification of firms exists. In almost all cases regional competition leads to a suboptimal provision of local infrastructure.

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  • Boris Maurer & Uwe Walz, 2000. "Regional Competition for Mobile Oligopolistic Firms: Does Public Provision of Local Inputs Lead to Agglomeration?," Journal of Regional Science, Wiley Blackwell, vol. 40(2), pages 353-375, May.
    • Handle: RePEc:bla:jregsc:v:40:y:2000:i:2:p:353-375
    DOI: 10.1111/0022-4146.00178
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    Cited by:

    1. Gunther Maier & Patrick Lehner, 2002. "Does space finally matter? The position of New Economic Geography in Economic Journals," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2002(1).
    2. C. Dembour, 2008. "Competition for Business Location: A Survey," Journal of Industry, Competition and Trade, Springer, vol. 8(2), pages 89-111, June.
    3. Ihara, Ryusuke, 2008. "Transport costs, capital mobility and the provision of local public goods," Regional Science and Urban Economics, Elsevier, vol. 38(1), pages 70-80, January.
    4. Roos, Michael W. M., 2004. "Agglomeration and the public sector," Regional Science and Urban Economics, Elsevier, vol. 34(4), pages 411-427, July.

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