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Agglomeration and endogenous absorptive capacities: hotelling revisited

Universität Jena und Max-Planck-Institut für Ökonomik Jena
Publication Date
  • O33
  • R12
  • L13
  • Spatial Agglomeration
  • Endogenous Spillovers
  • Absorptive Capacity
  • Non-Cooperative Game
  • Agglomerationseffekt
  • Standorttheorie
  • Industrielle Forschung
  • Wissenstransfer
  • Hotelling Modell
  • Duopol
  • Nichtkooperatives Spiel
  • Theorie


This paper proposes a theoretical model of spatial duopoly, where the location, on the one hand, and the absorptive capacity of rms as function of their internal R&D investment, on the other hand, endogenously determine the maximum level of knowledge spillovers rms might absorb. Our goal is to test whether this new modelling of spillovers a ects the traditional outcomes in terms of rms location choices . We solve a three-stage game, where rms choose their geo- graphical location, prior to their level of internal R&D expenditures, and nally compete in prices. We found that, at the optimum, rms choose the same level of internal R&D and set the same price, inde- pendently of their location. Moreover, rms locate symmetrically and tends to agglomerate in the center of the market as the transportation costs increase, knowledge spillovers being in that case maximum.

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