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The Economics of Inter-City Competition in Financial and Distribution Markets

Author

Listed:
  • Eddery Lam

    (Department of Economics, Rochester Institute of Technology, U.S.A.)

  • Chi-Yin Wu

    (Department of Economics, Feng Chia University, Taiwan)

Abstract

We introduce a model of inter-city competition within a multidimensional framework. More specifically, we extend a single-sector model to one comprising two sectors, namely, a financial sector and a distribution sector in a three-stage sequential-game framework. There are two types of infrastructure, with one for each sector. The government of each city can build the infrastructure necessary to increase the competitiveness of the relevant sector. However, given that resources are limited, each city has to decide on which type of infrastructure to build, as well as on which elements of that type they wish to invest in. Under this framework, we show that the relative abundance of resources, the initial costs of providing services, and the relative effectiveness of the infrastructure determine the amount of infrastructure the government decides to build, and thus the outcome of the game.

Suggested Citation

  • Eddery Lam & Chi-Yin Wu, 2016. "The Economics of Inter-City Competition in Financial and Distribution Markets," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 12(1), pages 85-117, February.
    • Handle: RePEc:jec:journl:v:12:y:2016:i:1:p:85-117
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    References listed on IDEAS

    as
    1. Steven Brakman & Harry Garretsen (ed.), 2008. "Foreign Direct Investment and the Multinational Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026457, April.
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    3. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-656, September.
    4. Ott, Ingrid & Soretz, Susanne, 2010. "Productive public input, integration and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 538-549, November.
    5. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    6. Ngo Van Long & Kar‐yiu Wong, 2009. "A Tale of Two Ports: The Economic Geography of Inter‐City Rivalry," Review of International Economics, Wiley Blackwell, vol. 17(2), pages 261-279, May.
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    8. Brakman, Steven & Garretsen, Harry & Marrewijk, Charles van, 2002. "Locational competition and agglomeration: the role of government spending," CCSO Working Papers 200209, University of Groningen, CCSO Centre for Economic Research.
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    More about this item

    Keywords

    inter-city competition; multidimensional framework; public infrastructure;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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