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Agglomeration in a city with choosy consumers under imperfect information

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  • Takahashi, Takaaki

Abstract

The purpose of this paper is to show that taste heterogeneity and imperfect information on the characteristics of available varieties among consumers can lead to the agglomeration of commercial activities. Here, the source of agglomeration is matching. By constructing a two-region model, we show that two distribution patterns – segregation and full agglomeration – may be supported as equilibrium outcomes. Their properties closely resemble those of the equilibrium patterns in the standard new economic geography models. In addition, it is shown that the third type of equilibrium pattern – incomplete agglomeration – may emerge when consumers pay different amounts of transport cost.

Suggested Citation

  • Takahashi, Takaaki, 2013. "Agglomeration in a city with choosy consumers under imperfect information," Journal of Urban Economics, Elsevier, vol. 76(C), pages 28-42.
    • Handle: RePEc:eee:juecon:v:76:y:2013:i:c:p:28-42
    DOI: 10.1016/j.jue.2013.02.001
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    Cited by:

    1. Wieland, Thomas, 2014. "Räumliches Einkaufsverhalten und Standortpolitik im Einzelhandel unter Berücksichtigung von Agglomerationseffekten: Theoretische Erklärungsansätze, modellanalytische Zugänge und eine empirisch-ökonome," MPRA Paper 77163, University Library of Munich, Germany.
    2. Wieland, Thomas, 2015. "Nahversorgung im Kontext raumökonomischer Entwicklungen im Lebensmitteleinzelhandel: Konzeption und Durchführung einer GIS-gestützten Analyse der Strukturen des Lebensmitteleinzelhandels und der Nahve," MPRA Paper 77145, University Library of Munich, Germany.
    3. Claudio-Pachecano, L. & Larralde, H., 2020. "Agglomeration or separation: Store patterns through an optimal location model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 542(C).
    4. Brad Humphreys & Josh Matti, 2018. "The Spatial Distribution of Urban Consumer Service Firms: Evidence from Yelp Reviews," Working Papers 18-03, Department of Economics, West Virginia University.
    5. AGO Takanori, 2015. "Competition between Cities and Their Spatial Structure," Discussion papers 15110, Research Institute of Economy, Trade and Industry (RIETI).
    6. Xuying Zhao & Arthur Lim & Hong Guo & Chao Ding & Jing-Sheng Song, 2019. "Retail Clusters in Developing Economies," Manufacturing & Service Operations Management, INFORMS, vol. 21(2), pages 452-467, May.

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    More about this item

    Keywords

    Agglomeration; Break point; Characteristics cost; Differentiated product; Hotelling model; Imperfect information; Matching; Pro-competitive effect; Segregation; Spatial competition; Sustain point; Taste heterogeneity; Transport cost;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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