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Title:Agglomeration and endogenous absorptive capacities: hotelling revisited PDF Logo
Authors:Hussler, Caroline
Lorentz, André
Rondé, Patrick
Issue Date:2007
Series/Report no.:Jena economic research papers 2007,102
Abstract:This paper proposes a theoretical model of spatial duopoly, where the location, on the one hand, and the absorptive capacity of rms as function of their internal R&D investment, on the other hand, endogenously determine the maximum level of knowledge spillovers rms might absorb. Our goal is to test whether this new modelling of spillovers a ects the traditional outcomes in terms of rms location choices . We solve a three-stage game, where rms choose their geo- graphical location, prior to their level of internal R&D expenditures, and nally compete in prices. We found that, at the optimum, rms choose the same level of internal R&D and set the same price, inde- pendently of their location. Moreover, rms locate symmetrically and tends to agglomerate in the center of the market as the transportation costs increase, knowledge spillovers being in that case maximum.
Subjects:spatial agglomeration
endogenous spillovers
absorptive capacity
non-cooperative game
Document Type:Working Paper
Appears in Collections:Jena Economic Research Papers (2007-2014), Max-Planck-Institut für Ökonomik und Universität Jena

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