Modelling the folk theorem: A spatial Cournot model with explicit increasing returns to scale

Arbeitspapier

This paper attempts to model directly the folk theorem of spatial economics, according to which increasing returns to scale are essential for understanding the geographical distributions of activity. The model uses the simple structure of most New Economic Geography papers, with two identical regions, a costlessly traded agricultural sector and a manufacturing sector subject to iceberg costs. This simple setting isolates IRS in manufacturing production function as the only potential agglomerating force. This implies that an unstable symmetric equilibrium means IRS cause agglomeration. The central result is that while a CRS manufacturing sector will always stay at the symmetric equilibrium, the presence of IRS in manufacturing causes the symmetric equilibrium to become unstable and agglomeration becomes the only long run equilibrium for the system.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Department of Economics Discussion Paper ; No. 07,01

Classification and Topics

• Classification: Wirtschaft ; General Regional Economics (includes Regional Data) ; Size and Spatial Distributions of Regional Economic Activity ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
• Subject: Agglomeration ; increasing returns to scale ; imperfect competition ; Regionale Konzentration ; Räumliche Verteilung ; Skalenertrag ; Unvollkommener Wettbewerb ; Neue ökonomische Geographie ; Regionalökonomik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Barde, Sylvain
• Event: Veröffentlichung
• (who): University of Kent, Department of Economics
• (where): Canterbury
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/68130
• Last update: 10.03.2025, 11:43 AM CET