
doi: 10.2139/ssrn.884367
handle: 2078.1/4605
We investigate how differences in set-up costs of various types affect the trade-off between global efficiency and spatial equity and show that the standard assumption of symmetry in fixed costs masks the existence of an interesting effect: the range of available varieties varies depends on the spatial distribution of firms. In such a setting, even when the market outcome leads to excessive agglomeration under symmetric fixed costs, a planner opts for asymmetric fixed costs and more agglomeration. The reason is that the losses induced by more agglomeration are offset by the gains due to additional product variety.
fixed costs, set-up costs, market size, international trade, home market effect, fixed costs; set-up costs; market size; international trade; homemarket effect, International trade, Fixed costs, Set-up costs, Home market effect, Market size, jel: jel:F12, jel: jel:F15, jel: jel:R12, jel: jel:R38
fixed costs, set-up costs, market size, international trade, home market effect, fixed costs; set-up costs; market size; international trade; homemarket effect, International trade, Fixed costs, Set-up costs, Home market effect, Market size, jel: jel:F12, jel: jel:F15, jel: jel:R12, jel: jel:R38
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