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We consider a three-location duopoly model such that (i) firms choose production and innovation locations before (Bertrand) competition takes place and (ii) there are internal and external knowledge spillovers. We show: (1) agglomerations where firms earn negative profits may exist when there are both external and internal knowledge spillovers; (2) greater external spillovers do not necessarily favor agglomeration; (3) decreasing communication costs tend to favor agglomeration; (4) there are exactly two types of agglomeration equilibria: either both firms innovate in the agglomeration, or there is an innovator and an imitator; and (5) if there is a location where both firms produce, then innovation must take place in this location.
|Item Type:||Journal Article, refereed, original work|
|Communities & Collections:||03 Faculty of Economics > Department of Economics|
|Date:||08 October 1999|
|Deposited On:||11 Feb 2008 13:21|
|Last Modified:||23 Nov 2012 17:26|
|WoS Citation Count:||10|
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