Firm Location Choice with Technological Diffusion

This paper formulates a three-stage cournot duopoly model on a circular city to investigate firm location choice and firm R&D strategic interaction. Both firms choose locations, make R&D decisions and compete a la cournot. In the presence of spillovers and complementarities of technology innovation, this paper derives two subgame perfect Nash equilibria: a strictly dispersed equilibrium without firm R&D activities and a strictly agglomerated equilibrium with R&D activities by both firms.