We analyze a location-choice model with two vertically differentiated firms and two regions with different consumer income. We find that the high-quality producer settles in the poor region and the low-quality one in the rich region when income disparities are sufficiently high and goods are differentiated enough. This apparently counter-intuitive result is not determined by technology or size issues; rather, it relies on the relationship between regional income disparities and product quality, which we call the “Quality-Income effect.”
E. Bacchiega , A. Minniti (2009). The Quality-Income Effect and the Selection of Location. JOURNAL OF URBAN ECONOMICS, 65(2), 209-215.
The Quality-Income Effect and the Selection of Location
BACCHIEGA, EMANUELE;MINNITI, ANTONIO
2009
Abstract
We analyze a location-choice model with two vertically differentiated firms and two regions with different consumer income. We find that the high-quality producer settles in the poor region and the low-quality one in the rich region when income disparities are sufficiently high and goods are differentiated enough. This apparently counter-intuitive result is not determined by technology or size issues; rather, it relies on the relationship between regional income disparities and product quality, which we call the “Quality-Income effect.”I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.