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Market size, competition, and entrepreneurs’ location choices

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  • Kim, Donghyuk

Abstract

This paper proposes an equilibrium model of entrepreneurs’ location choices. If larger markets are sufficiently more competitive, they attract more talented entrepreneurs than smaller markets, leading to perfect talent sorting. Simulation results show that a jurisdiction’s returns to unilaterally improving entrepreneurs’ profitability to attract entrepreneurs depend on the dispersion of talents and the resulting trade-off between market size and competition. I propose a method of deriving lower bounds on latent entrepreneurial talents and market sizes with data on entrepreneurs’ locations and market shares.

Suggested Citation

  • Kim, Donghyuk, 2023. "Market size, competition, and entrepreneurs’ location choices," Economics Letters, Elsevier, vol. 229(C).
    • Handle: RePEc:eee:ecolet:v:229:y:2023:i:c:s0165176523002288
    DOI: 10.1016/j.econlet.2023.111203
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    References listed on IDEAS

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    1. Edward L. Glaeser & William R. Kerr & Giacomo A. M. Ponzetto, 2010. "Clusters of Entrepreneurship," NBER Chapters, in: Cities and Entrepreneurship, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Location choice; Market structure; Competition;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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