Some unresolved issues in the location theory of the firm

Welfare-maximizing location versus profit-maximizing location

“…Now an interesting question arises: What happens to location outcome when the production function is homogeneous of degree n? Under this condition, substituting (14) into (23') and (24'), respectively, and noting u'(x) 0, we obtain: HONG HWANG AND CHOA-CHENG iVIAI Both the profit-maximizing monopolist's and the welfaremaximizing producer's locations are invariant with respect to a change in demand if and only if the production function is constant returns to scale, i.e., n = i. But, they are closer to (farther away from) the market site as demand increases if and only if the production function is increasing (decreasing) returns to scale, i.e., n > l (n < l).…”

“…Its slope can be determined by the total differential of (12), i.e., (13) ~x=0 = TTXX dx Since ~xx < 0, it follows from (13) that the sign of ~--Mis indeterminate, it depends upon the sign of ~xM 9 The latter, in turn, ig'aependent upon the characteristics of the producHon function in question. In what follows, we assume that the production function is homogeneous of degree n. Equation (1) then becomes: (14) It follows from (13'), (16) and (17) that the loci W x = 0; W~[ = 0; ~. = 0; and WM = 0 are all positively (negatively) sloped if the production func~on is decreasing (increasing) returns to scale, i.e., n < l (n > l).…”

“…The theory of industrial location in a heterogeneous space, i.e., markets arise at discrete points, was first developed by Launhardt [10] and Weber [22] and then extended in several directions by many others, notably Moses [17], Sakashita [18,19], Bradfield [2], Emerson [4], Woodward [23], Khalili, Mathur and Bodenhorn [9], Miller and Jensen [16], Mather [14,15], Eswaran, Kanemoto and Ryan [5], Mai [II,12], Martinich and Hurter [13], and Hsu and Mai [8]. In the traditional location model, the firm's location is determined either by profit maximization or by cost minimization considerations.…”

Exclusion theorem in an efficiency wage model

“…A well-known component of the location theory of the firm, dubbed the ''exclusion theorem,'' has attracted the attention of many economists (for example, Sakashita 1967;Mathur 1979;Higano 1985). The theorem states that when a profit-maximizing or cost-minimizing firm chooses its optimal location between the input and the output markets along a line, there is no possibility of an intermediate location under the reasonable assumption that transport rates are constant or decreasing with distance.…”

The Tariff‐Jumping Argument and Location Theory

“…4. The particular references here are Weber (1929), Moses (1958), Sakashita (1967), Mathur (1979), and Mai (1981). 5.…”