External Economies of Scale and Optimal Plant Location

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Title:	External Economies of Scale and Optimal Plant Location
Authors:	麥朝成;Mai, Chao-cheng;Hwang, Hong
Contributors:	淡江大學產業經濟學系
Date:	1997-06
Issue Date:	2011-09-29 10:54:09 (UTC+8)
Publisher:	Blackwell Publishing
Abstract:	This paper departs from earlier work on location theory by introducing external economies of scale into the Weber–Moses location model. It is shown that under Cournot–Nash competition, when external economies prevail, constant returns to scale at the firm level is not a sufficient condition for ensuring the invariance of the firm's optimal location with respect to a change in market demand, regardless of whether or not free entry is allowed. Moreover, when free entry is allowed and the production function exhibits decreasing returns to scale, but with very strong external economies, the optimal location moves towards or away from the market as demand increases according to whether the demand function is convex or concave. These results are different significantly from the conventional wisdom.
Relation:	Pacific Economic Review 2(2), pp115-124
DOI:	10.1111/1468-0106.00027
Appears in Collections:	[Graduate Institute & Department of Industrial Economics] Journal Article

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