Jacques-François Thisse

Taste Heterogeneity, Labor Mobility and Economic Geography

This paper investigates the impact of the heterogeneity of the labor force on the spatial distribution of activities. This goal is achieved by applying the tools of discrete choice theory to an economic geography model. We show that taste heterogeneity acts as a strong dispersion force. We also show that the relationship between the spatial distribution of the industry (the wage differential) and trade costs is smooth and bell-shaped. Finally, while Rawlsian equity leads to the dispersion of industry, our analysis reveals that efficiency leads to a solution close to the market outcome, although the latter is likely to involve too much agglomeration compared to the former.

Mixed oligopoly with differentiated products

Abstract The paper analyzes a mixed oligopoly with horizontal product differentiation. Firms choose their location and price in a model a la Hotelling with quadratic transport costs, and the solution-concept is a subgame perfect Nash equilibrium. This enables one to determine how the presence of one or several public firms competing with private ones affects social welfare and how the results depend on the total number of firms (n) and their relative positions. It is shown that is only for n=2 or n≧6 that a mixed oligopoly with one public firm is socially preferable to the private oligopoly.

Spatial Discrimination - Bertrand Vs Cournot in a Model of Location Choice

Abstract A model with two firms competing in location and sales is analyzed for the case of spatial discrimination. Consumers are uniformly distributed along a line segment and have identical downward sloping demands. Two games are solved and results are compared. In one game, firms first choose locations and then quantity schedules; in the other, the final stage is choice of price schedules. Prices and transport costs are lower under Bertrand competition. Profits are higher under Cournot competition for low transport costs, but the reverse holds for larger values of these costs. Aggregate welfare is higher in the Bertrand competition case. In both games, firms locate in such a way as to minimize their own transport costs for the sales pattern arising in equilibrium, but the equilibrium configurations are quite different.

Demand for Differentiated Products, Discrete Choice Models, and the Characteristics Approach

We propose a specific characteristics framework in order to construct linkages between alternative conceptual approaches to modelling product differentiation. First, it is shown that a demand system which satisfies the gross substitutes property imposes specific requirements on the locations of products. In particular, the dimension of the characteristics space must be larger than or equal to the number of products minus one. We then identify a method for casting a given demand system (subject to certain restrictions) into our characteristics framework. This is illustrated for the logit, probit and linear probability models of discrete choice theory. Finally, we find a characteristics representation of the CES representative consumer.

Globalization and the Evolution of the Supply Chain: Who Gains and Who Loses?

This article focuses on two distinct facets of globalization: decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities. When the unskilled have about the same wage in two regions, decrease of these costs fosters the agglomeration of plants in the core accommodating headquarters. When the wage gap is significant, process of integration eventually triggers the relocation of plants into the periphery. When this process of relocation is driven by falling communication costs, the welfare of all workers in the core falls whereas that in the periphery rises.

On the taxation of polluting products in a differentiated industry

This paper studies the provision of environmental quality in an imperfectly competitive market. It uses a vertical differentiation model in which the free entry equilibrium results in an under-provision of quality. The following main results are obtained. First, a commodity tax may have a significant impact on the market structure: in this setting it tends to increase the number of active firms. Second, through its impact on market structure, a commodity tax may be welfare-improving, even though quality creates a positive externality. Third, a commodity tax may bring about an equilibrium that is arbitrarily close to a Pareto-efficient allocation.

Regional Specialization, Urban Hierarchy, and Commuting Costs

We consider an economic geography model of a new genre: all firms and workers are mobile and their agglomeration within a city generates rising urban costs through competition on a land market. When commuting costs are low (high), the industry tends to be agglomerated (dispersed). With two sectors, the same tendencies prevail for extreme commuting cost values, but richer patterns arise for intermediate values. When one good is perfectly mobile, the corresponding industry is partially dispersed and the other industry is agglomerated, thus showing regional specialization. When one sector supplies a nontradeable consumption good, this sector is more agglomerated than the other. The corresponding equilibrium involves an urban hierarchy: a larger array of varieties of each good is produced within the same city.

The Minisum and Minimax Location Problems Revisited

The minisum minimax problem consists of locating a single facility in the plane with the aim of minimizing the sum of the weighted distances the maximum weighted distance to m given points. We present two solution methods for generalized versions of these problems in which i location is restricted to the union of a finite number of convex polygons; ii distances are approximated by norms that may differ with the given points; and iii transportation costs are increasing and continuous functions of distance. Computational experience is described.

Price Discrimination and Equilibrium in Monopolistic Competition

Modern theories of monopolistic competition have borrowed extensively from techniques developed in location theory and the theory of spatial pricing. A subject of concern is that there exists no free-entry price-location equilibrium. We demonstrate its existence, provided only that producers are allowed to price discriminate among consumers.

Economics of location:: a selective survey

We present a selective survey of the main results obtained in spatial economic theory. Our focus is on firm location. We start with the simplest location problem and proceed to recent models of industrial location in general equilibrium. The middle section is a review of what has been accomplished in the literature on spatial pricing and spatial competition. We conclude with a discussion of recent models of economic geography which explain the uneven spatial distribution of economic activity.