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Discussion Paper Details

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Title: Optimal Transportation Policy with Strategic Locational Choice

Author(s): Jacques-François Thisse and David Wildasin

Publication Date: April 1994

Keyword(s): Firm Location, Public Facility, Transportation Policy and Urban Structure

Programme Area(s): Industrial Organization

Abstract: This paper presents a model of strategic locational choice by duopolistic firms in an urban area where consumer locations are endogenous and where a public facility is exogenously fixed. A welfare analysis taking their strategic behaviour into account is conducted. It is shown that the firms' equilibrium locations often differ from the optimal locations which, in contrast to standard location theory, are not at the quartiles of the urban area. Corrective transportation taxes or subsidies can be used to support an optimal locational structure. Changes in transportation costs require unit-for-unit offsetting changes in transportation taxes or subsidies.

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Bibliographic Reference

Thisse, J and Wildasin, D. 1994. 'Optimal Transportation Policy with Strategic Locational Choice'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=933