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- Title
Commitment, Efficiency and Footloose Firms.
- Authors
King, Ian; Welling, Linda
- Abstract
We consider dynamic competition between a small number of local governments to attract a single large plant. The surplus available in each location is unknown when the initial location decision is made. Two cases are considered: if all agents can commit to second period actions; and if they cannot. Without commitment, initially the firm will discriminate against the region with the lower set-up costs. If first-period productivity is low, the firm may relocate and receive an ex post subsidy from a second region. Commitment decreases the expected total surplus and, if fixed costs are small, favours the firm.
- Subjects
COMPETITION; PRODUCTION (Economic theory); INDUSTRIAL costs; OVERHEAD costs; SUPPLY &; demand; LOCAL government
- Publication
Economica, 1992, Vol 59, Issue 233, p63
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2555066