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A Comment on Location and Industrial Efficiency with Free Entry

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  • B. Curtis Eaton
  • Richard G. Lipsey

Abstract

We consider Gee's model of industrial location and prove analytically that, given Gee's assumption of price discrimination, firms always wish to locate in the centres of their markets. This contrasts the result for mill-price-plus-transport-cost pricing where firm locate in the centres of interior markets, but not in the centres of peripheral markets. We also show that other of Gee's results depend on his omission of a key equilibrium condition with respect to the relocation of firms already in the market. We reassert the propositions challenged by Gee, that pricing behaviour and the existence or non-existence of boundaries to the whole market critically affect the results derived from a broad class of industrial location models.

Suggested Citation

  • B. Curtis Eaton & Richard G. Lipsey, 1977. "A Comment on Location and Industrial Efficiency with Free Entry," Working Paper 269, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:269
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    Cited by:

    1. MacLeod, W.B. & Norman, G. & Thisse, J.-F., 1988. "Price discrimination and equilibrium in monopolistic competition," International Journal of Industrial Organization, Elsevier, vol. 6(4), pages 429-446.
    2. George Norman & Jacques‐François Thisse, 1999. "Technology Choice and Market Structure: strategic aspects of flexible manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 345-372, September.
    3. Rodolphe Dos Santos Ferreira & Ehud Zuscovitch, 2010. "Jack of All Trades or Master of One? The Specialization–Flexibility Trade-off," Chapters, in: Jean-Luc Gaffard & Evens Salies (ed.), Innovation, Economic Growth and the Firm, chapter 7, Edward Elgar Publishing.
    4. Brett W. Cantrell & Victoria Dickinson, 2020. "Conditional Life Cycle: An Examination of Operating Performance for Leaders and Laggards," Management Science, INFORMS, vol. 66(1), pages 433-451, January.

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