Vertical Differentiation, Spillover Effects and the Location of Firms

• Main Authors: CHIANG, MEI-LING, 江美玲
• Other Authors: TSAI, JYH-FA
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/89043052999367914664

碩士 === 東吳大學 === 經濟學系 === 91 === Abstract Whether firms agglomerate on geography is an important issue in Regional Economics. Moreover, research and development (R&D) of product is a significant field in Industrial Economics as well. The purpose of this paper is to combine the two issues above by improving the model of Gersbach and Schmutzler (1999) (say G-S model) to explore the location choice of firms. On vertical differentiation and horizontal differentiation, this study investigates if the firms cluster more easily after adding a stage of quality choice of the firms with the effects of R&D spillovers. We develop a three-stage non-cooperative game to analyze a duopoly location choice problem among three areas. At stage one, the firms determine the production and innovation locations simultaneously. They then set their quality simultaneously at stage two and price level in the final stage. After adding the stage of quality choice into G-S model, we show: (1) The technological sourcing equilibrium in G-S model is not equilibrium any more. (2) Besides gaining the research centers equilibrium as G-S model, we find three other types of agglomeration equilibria: two imitation equilibria and one agglomeration equilibrium. The former exists when one-way external spillovers are high enough and internal spillovers are intermediate; the latter exists when mutual external spillovers are high enough and internal spillovers are intermediate. This agglomeration equilibrium differs from G-S model in that both firms innovate in the agglomeration but only one firm builds additional plants. (3) If mutual external spillovers are high enough, both firms may earn positive profits in the agglomeration. The result is different from G-S model in which at least one firm earns negative profit in the agglomeration.