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OPTIMUM LOCATION AND THEORY OF THE FIRM UNDER A REGULATORY CONSTRAINT *
Author(s) -
Mai Chaocheng
Publication year - 1985
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.1985.tb00313.x
Subject(s) - constraint (computer aided design) , microeconomics , economics , rate of return , profit (economics) , space (punctuation) , function (biology) , marginal product , capital (architecture) , product (mathematics) , industrial organization , mathematics , computer science , finance , production (economics) , history , geometry , archaeology , evolutionary biology , biology , operating system
This paper attempts to incorporate space in the theory of a regulated firm. It will show that the A‐J effects are not affected in a spatial setting. In addition, it will also demonstrate that as the difference between the regulated fair rate of return and the unconstrained profit‐maximizing rate of return on capital becomes greater, the optimum location of the regulated firm moves towards the site of the product market, if capital and labor are complements (substitutes) and if marginal transportation costs (with respect to distance) are an increasing (decreasing) function of labor usage.