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Quantity-Discounted Transportation Rates, Location, and the Theory of Production

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  • J P O'Brien

    (Department of Economics, School of Management, University of Alaska Fairbanks, Fairbanks, AK 99775-0580, USA)

  • Y-N Shieh

    (Economics Department, San Jose State University and University of Alaska Fairbanks, San Jose, CA 95192-0114, USA)

Abstract

The theoretical impacts and implication of quantity-discounted transportation rates on the optimum location decisions of the firm in the linear space are investigated. It is shown that the linearly homogeneous or homothetic production function alone no longer ensures the independence between the choice of plant location and the output level or the demand condition, unless (1) the elasticities of transportation rates with respect to quantity are constant and identical; and (2) the ratio of marginal products is equal to the ratio of marginal transportation costs. Moreover, and more importantly, some conclusions obtained by prior studies on location theory can be shown to be special cases of these more general results, but others are not defensible when the transportation rate depends upon quantity shipped.

Suggested Citation

  • J P O'Brien & Y-N Shieh, 1990. "Quantity-Discounted Transportation Rates, Location, and the Theory of Production," Environment and Planning A, , vol. 22(11), pages 1487-1496, November.
    • Handle: RePEc:sae:envira:v:22:y:1990:i:11:p:1487-1496
    DOI: 10.1068/a221487
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    References listed on IDEAS

    as
    1. Miller, Stephen M. & Jensen, Oscar W., 1978. "Location and the theory of production : A review, summary and critique of recent contributions," Regional Science and Urban Economics, Elsevier, vol. 8(2), pages 117-128, May.
    2. Shieh, Yeung-nan & Mai, Chao-cheng, 1984. "Location and the theory of production Clarifications and extensions," Regional Science and Urban Economics, Elsevier, vol. 14(2), pages 199-218, May.
    3. Mai, Chao-Cheng & Shieh, Yeung-Nan, 1984. "Transport rates structure, optimum location, and theory of production: Reexamination," Journal of Urban Economics, Elsevier, vol. 16(2), pages 225-231, September.
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