Demand and location decision of a monopsonistic firm

This paper examines the impact of demand on the location decision of a monopsonistic firm in the Weber-Moses triangle with one output and two inputs. When the distance of the plant location from the product market is held constant and the expansion path is linear through the origin, the analysis shows that as demand for output increases, the monopsonist has an incentive to move the plant away from the monopsonized input market and towards other markets. When the distance of the plant location from the product market is a choice variable, the linearly homogeneous production function is not sufficient to ensure that the location decision of the monopsonistic firm is independent of the demand function. These results differ significantly from the well-established results in location theory where the firm is a price taker in all the input markets. Received: February 1996 / Accepted in revised form: September 1996     

Technological spillovers and the location of production in an asymmetric duopoly

We evaluate the impact of technological externalities on the location choices of duopolistic firms in a Weber triangle. Assuming technological spillover effects to be decreasing in the distance between firms, we show that each firms optimum location is independent of a demand shock when the firms distance to market is constant. When distance to market is variable, a firms optimum location will not be independent of a demand shock if one of the duopolistic firms has non-linear technology. The optimum location of an IRS (DRS) firm moves away from (closer to) the market place if the other firm is CRS and if demand is not strongly concave or convex.Received: 14 March 2002, Accepted: 5 August 2003, JEL Classification: D23, L13, R30Ping-yen Lai: I would like to thank Jacques Poot, Mike Sperr and two anonymous referees for insightful comments, which contributed to improvement of this article. All errors are my responsibility.     

On the optimal production and location of a labor-managed firm

This paper endeavors to introduce space into the theory of the Labor-Managed firm (LMF) and to investigate its optimal production and location decisions. It is shown that the degree of returns to scale plays a key role in the determination of optimal production and location for an LMF, in particular, that the optimal location of an LMF is farther away from (closer to) the market as compared to a profit-maximizing firm (PMF) if the production function is of increasing (decreasing) returns to scale. We also demonstrate that the optimum location of an LMF moves closer towards the market as demand increases, regardless of whether the production function is of increasing or decreasing returns to scale. This finding is in sharp contrast with that in a capitalist economy. Received: February 2000/August 2000     

Network facility-location models in Stackelberg-Nash-Cournot spatial competition

A hierarchical mathematical programming approach is combined with sensitivity analysis (of variational inequalities) to formulate a facility-location model for a firm competing on a discrete network. It is assumed that the locating firm will act as the leader firm in an industry characterized by Stackelberg leader-follower(s) oligopolistic competition. The othern competitors in this industry are assumed to act as Cournot firms that each operate under the Cournot assumption of zero conjectural variation with respect to theirn — 1 Cournot competitors. It is further assumed that then Cournot firms will react to the location/production/shipping activities of the Stackelberg firm. Therefore, when the Stackelberg firm makes its location, production, and shipping decisions it takes into account the reaction of then Cournot firms to its (the Stackelberg firm's) integrated location and distribution decisions. Specifically, a Cournot reaction function is developed and imbedded in the Stackelberg firm's profit-maximizing objective function to project the anticipated reaction of the Cournot firms to the Stackelberg firm's location decision.An earlier version of this paper was presented at the 37th North American Meetings, Boston, November 1990.     

Specific commodity taxes,output and location decision under free entry oligopoly

This paper examines the impact of a specific commodity tax as a policy device on output per firm, the number of firms, total output and the location decision of undifferentiated oligopolistic firms in the Weber–Moses triangle. It shows that when the distance between the plant location and the output market is held constant, the impact of an increase in the specific commodity tax on output per firm, the number of firms and total output is consistent with the well-known Besley propositions in the non-spatial setting. Furthermore, when the distance between the plant location and the output market is a decision variable, the impact of a specific commodity tax on the output per firm will be consistent with the well-known Besley proposition. However, the impact of a specific commodity tax on the number of firms and total output is significantly different from the Besley propositions. This indicates that distance and firm’s location decision have important influence on the effects of a change in the specific commodity tax on output and location of oligopolistic firms.     

A MARKET COVERAGE MODEL FOR PRODUCER SERVICES

ABSTRACT We present a model of the optimum market size of a producer service firm that is based on that contact requirements of its service as well as the firm's distance to its prospective clients. The effects on market size of differing contact requirements are discussed from a comparative statics perspective. Optimum market sizes are shown to vary with different values of service duration and demand frequency. These differences may exist between producer service industries, and they may also arise from changes over time in the market requirements of a particular industry. The paper concludes with suggestions for improving the muscle. An impartial agenda for advancing the modeling interests of service-sector researchers also presented.     

Measuring a dominant firm's market power in a restructured electricity market, a case study of Colorado

There is no guarantee that electric restructuring will bring the expected price benefits in a state with a dominant firm and significant transmission consraints. Reducing the dominant firm's market share is done most easily if the company voluntarily agrees to divest a portion of its generation in return for favorable regulatory treatment. If a voluntary agreement between the state and the firm cannot be reached, reducing the dominant firm's market share is much more difficult.     

Location and output of the labor-managed firm under price discrimination

This paper considers the impact of location on the output effect of third-degree price discrimination. It shows that the price discrimination may increase, decrease or leave total output of the labor-managed firm unchanged even if the demand curves in two separate markets are linear. This result is significantly different from the conventional non-spatial result. It indicates that the location decision of the labor-managed firm has an important influence on the output effect of third-degree price discrimination.Received: April 2002/Accepted: February 2004I am grateful to Professor Tschangho John Kim and an anonymous referee for valuable comments and suggestions that have substantially improved the paper. All remaining errors are my own     

Cournot oligopolistic competition in spatially separated markets: The Stackelberg equilibrium

Consider a two-stage non-cooperative Cournot game with location choice involving r firms. There are n spatially separated markets located at the vertices of a network. Each firm, first selects the location of a facility and then selects the quantities to supply to the markets in order to maximize its profit. Non-zero conjectural variation at the second stage in the model by Sarkar et al. (1997) is studied. When the demand in each market is sufficiently large, equilibrium in the quantities offered by each firm in the markets exists. Furthermore, each firm chooses to locate its facility at the vertices.Partially financed by Ministerio de Ciencia y Tecnología (Spain) and FEDER, grant BFM2002-04525-C02-01.Received: August 2002 / Accepted: May 2003     

Heterogeneous duopoly, spatially discriminatory pricing, and optimal location

It is found in the literature that if duopolists produce differentiated products and engage in price competition in a linear city model with elastic demand, the two firms necessarily agglomerate at the market center and this is the unique locational equilibrium, irrespective of the pricing policies charged by the firms. Utilizing a more reasonable market-serving assumption, this paper finds that the firms can be either centrally agglomerated or dispersed depending on the magnitude of the transport rate and the degree of product differentiation. Moreover, if the two firms choose quantity instead of price as their decision variables, the two firms become less likely to stay apart. But if they do, the distance of their locations necessarily shrinks. This paper also examines the locational configuration in the absence of the market-serving assumption and finds that spatial dispersion could be the only location pattern.     

The impact of revenue-neutral tax policy on plant location under price uncertainty

This research note incorporates price uncertainty into a production- location model and examines the impacts of a revenue-neutral tax policy on production and location decisions. In particular, it is shown that under an assumption of decreasing absolute risk aversion, a revenue-neutral rise in the marginal tax rate increases the firm's output and causes the firm to move its plant closer to (away from) the market center provided that the production function exhibits increasing (decreasing) returns to scale. Nevertheless, the plant location remains unchanged as a result of a revenue-neutral tax policy if the production function is constant returns to scale. A comparison between revenue-neutral and income or lump-sum taxes and hence some important policy implications are also provided in the analysis. Received: 1 March 1997 / Accepted: 18 May 1999     

Welfare-maximizing and profit-maximizing agroindustry location: A comparison

Traditionally, the location model has assumed that firms choose their location and input usage so as to maximize their profits. However, in the planning version of the location model, the industrial location might be selected on the basis of a welfare-maximizing objective. This paper attempts to develop systematically the theory of plant location for a welfare-maximizing agroindustrial firm and to compare it with its profit-maximizing counterpart. Our analysis shows that, unless the transport cost of raw materials is linear in distance and the firm's production function is homogeneous of degree one, the welfare-maximizing location chosen by a regulated agroindustrial firm always differs from that of its profit-maximizing counterpart. It also demonstrates that the results obtained previously for a non-agroindustrial firm cannot be applied directly to its agroindustrial counterpart. Received: August 1998/Accepted: January 1999     

Agroindustry location under uncertainty: The effects of business taxes

This note employs a unifying approach to examine the impacts of various forms of business taxes on an agroindustrial firm's choice of plant location under uncertainty. It shows that, if the production function is homogeneous of degree one, then the lump-sum and proportional profit taxes are spatially neutral for any risk-averse agroindustrial firm operating with a random raw material price. For cases where the taxes are spatially non-neutral, unambiguous effects regarding an agroindustrial firm's locational response to the imposition of business taxes have also been provided. In addition, we demonstrate that the spatial effects of business taxes on agroindustrial firms differ sharply from their non-agroindustrial counterparts. Received: 5 December 2000 / Accepted: 11 January 2002 RID="*" ID="*" I would like to thank the Pacific editor and two anonymous referees for valuable comments and suggestions on an earlier draft.     

Agroindustry location under output price uncertainty

Although the location theory of industry has received much attention in the literature, Hsu (1997) has demonstrated that the theory developed to date is not applicable to an agroindustry, that is, the industry of processing the agricultural product. Recognizing that the complete analysis of Hsu (1997) has been conducted in a deterministic world, and that in an economy subject to spatial friction, market information about prices is often incomplete and costly, the firm, accordingly, faces many types of uncertainty in making its location decision. This paper attempts to develop systematically the theory of plant location for an agroindustrial firm under output price uncertainty. Our analysis shows that the presence of output price uncertainty has significant influence on an agroindustrial firm‘s location decision. Most pointedly, a risk-averse agroindustrial firm‘s choice of production location under output price uncertainty always differs from the one under certainty. It also demonstrates that in many respects, the implication of output price uncertainty for an agroindustrial firm is in sharp contrast to its non-agroindustrial counterpart. Received: November 1997 / Accepted: March 1998     

A note on heterogeneous demand and plant location

This paper investigates the optimum location of a firm under uniform pricing when demand curves are not identical but are dependent on consumer location. It shows that the Quinn-Alonso-Rydell delivery cost minimization approach no longer applies, and the median location is unlikely to be chosen even if the delivery cost function is linear. These are quite different from the traditional results.I am grateful to a referee for his stimulating criticism and helpful comments. I am also indebted to Professors L. C. Lee, L. H. Lee, C. C. Mai and especially T. R. Lakshmanan for very helpful comments and suggestions. Any remaining errors are mine. Financial support from CSU research grant is gratefully acknowledged.     

Spatial duopoly under uniform delivered pricing when firms avoid turning customers away

This paper studies a spatial duopoly under uniform delivered pricing when firms do not ration the supply of the good, thus extending to a spatial context the analysis of oligopolistic markets with no rationing. The paper shows the existence of the equilibrium in prices under different tie-breaking rules (TBR) and compare the features of the equilibria found under these rules, thereby allowing to highlight the importance of the choice of the TBR in studying these models. When consumers buy from the nearest firm in case of equal prices (efficient TBR), any symmetric price pair within a given range is a Nash equilibrium, with each firm serving exactly half of the market line. If demand in each local market is equally split between the firms charging the same price (random TBR), the only equilibrium price is the one that gives zero profits to each firm. The degree of competitiveness of the market crucially depends on the TBR. Under the efficient TBR, all (but one) price equilibria deliver positive profits to both firms. Under the random TBR, the market outcome is very competitive in that firms make zero profits. None of the equilibria found under any tie-breaking rule are allocatively efficient.This paper is based on my DPhil thesis at the University of York. I would like to thank Gianni De Fraja, Keith Hartley, Peter Simmons, Catherine Waddams, Xavier Wauthy and participants to the 1998 EARIE and ERSA conferences for helpful comments and discussion. The paper has also been improved by the very useful comments of two referees of this journal. The usual disclaimer applies.Received: January 2001 / Accepted: January 2003     

Endogenous product differentiation and product R&D in spatial Cournot competition

We investigate in a spatial Cournot competition setting how much product research and development (R&D) investment firms make in order to differentiate their goods. The model features a location competition in the first stage, R&D competition in the second stage, and Cournot competition in the third stage. There are two differentiation methods in the model??spatial differentiation affecting the firm costs, and differentiation in the demand function affecting the demand levels. We find that comparing to the setting with no spatial connotation, the firms tend to invest less in product R&D. We also consider welfare implications. Although the firms employ maximum differentiation in equilibrium, there are cases in which welfare can be improved if the firms are to locate closer to each other.     

The effects of business taxes on production location under technology uncertainty

This paper attempts to examine the impact of various forms of taxation on the firm's optimal plant location in a world with technology uncertainty, where the location as well as production decisions are determined ax ante, and the specifications of production function and technology uncertainty are in a general form. Our analysis shows that the imposition of business taxes is, in general, spatially nonneutral in the presence of technology uncertainty. Most pointedly, this paper demonstrates that, in addition to factors such as the firm's attitude toward risk and its production technology, “how an input affects risk” plays a significant role in determining the impact of taxation on production location. Received: August 1997/Accepted: June 1998     

Tax effects in a two‐region model of monopolistic competition

I examine how unit tax and ad valorem tax affect firm location in a monopolistic‐competition model with asymmetrically sized regions and a quasi‐linear preference. Tax revenue is evenly distributed to all workers or evenly distributed to the workers residing in the region generating the tax revenue. When a homogeneous good is traded, despite reimbursement systems, the ad valorem tax retains the firm share, while the unit tax accelerates firm agglomeration in the larger region. When the homogeneous good is nontradable, despite taxation schemes, the intraregional distribution retains the firm share, while the interregional one accelerates agglomeration in the larger region.     

基于"企业-城市"动态博弈的城市商务成本研究

城市价值决定城市商务成本,城市商务成本又决定企业的生产经营成本,是企业是否进入某一城市投资的重要决策依据。城市商务成本变化是企业与城市间动态博弈的结果,城市商务成本的判断既要与同类城市进行比较,又要与企业的主观判断进行比较。城市商务成本调整的起点,是明确城市的战略定位。