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Endogenous Spillovers and Locational Choice
Regional Science and Urban Economics (2005)
  • Claudio Piga, Loughborough University
  • Joanna Poyago-Theotoky, Loughborough University
Abstract

We present a three-stage game where two firms choose location, R&D and price, under the assumption that R&D spillovers depend on firms’ location. That is, the closer firms are to each other, the greater the benefit they receive from their rivals’ efforts in quality-enhancing R&D. We show that the distance between firms’ location increases with the degree of product differentiation. Further, we find that minimal quality differentiation always occurs. Finally, investment in R&D is positively associated with the degree of product differentiation.

Publication Date
2005
Citation Information
Claudio Piga and Joanna Poyago-Theotoky. "Endogenous Spillovers and Locational Choice" Regional Science and Urban Economics Vol. 35 (2005)
Available at: http://works.bepress.com/joanna_poyago_theotoky/11/