Optimum Location and the Theory of Production: A Comparative Static Approach

Abstract

Location theory of the firm in a simple context was pioneered by Weber, whose analysis involved a firm with fixed coefficient technology attempting to determine the profit maximizing location with respect to input sources and market location. This paper uses methods presented by Khalili et al. It is a comparative static analysis of the location problem of a profit maximizing firm in which the effect of several changes in the exogenous variables on the location decision of the firm with and without prior locational constraint are determined. Specifically, it formulates a profit maximization location problem and analyzes the effect of changes in output price, output transport rates, and input prices on the location decision with and without prior constraint on the location distance from the market.