This paper tries to ascertain whether or not the profit-maximizing transport mode will be different from the welfare-maximizing one, and investigates the impact of endogenizing the choice of transport mode on the choice of location and input usage. It is shown that the results derived are critically dependent on the characteristics of the chosen production function as well as the specification of the transport cost structure. The model is particularly relevant in countries such as Taiwan, where transport regulation can play a crucial role in determining the location and output of certain industries.
