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Agglomeration and the Extent of the Market: An Experimental Investigation into Spatially Coordinated Exchange

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  • Jordan Adamson

    (Smith Institute for Political Economy and Philosophy, Chapman University)

Abstract

How and why do agglomerations emerge? While economic historians emphasize trade and economic geographers emphasize variety, we still don’t understand the role of coordination. I fill this gap by extending the model of Fudenberg and Ellison (2003) to formalize Smith’s (1776) theory of agglomeration. I then test the model in a laboratory experiment and find individuals tend to coalesce purely to coordinate exchange, with more agglomeration when there is a larger variety of goods in the economy. I also find that tying individuals to the land reduces agglomeration, but magni?es the effect of variety.

Suggested Citation

  • Jordan Adamson, 2018. "Agglomeration and the Extent of the Market: An Experimental Investigation into Spatially Coordinated Exchange," Working Papers 18-12, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:18-12
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    File URL: https://digitalcommons.chapman.edu/esi_working_papers/250/
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    References listed on IDEAS

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    More about this item

    Keywords

    Spatial Coordination; Agglomeration; Pure-Exchange;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • F19 - International Economics - - Trade - - - Other

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