Impact of different pricing policies and types of competition on the optimum location of industry

Abstract

There is need to explore the various factors that affect industrial site selection and the impacts of different pricing policies and types of competition on the location of industry. This dissertation proceeds to fulfill that need. In general, the traditional theory of industrial location is based on the rather limited assumptions of F.O.B. mill pricing and a uniform distribution of consumers. The basic objective of this dissertation is to explore the impacts on industrial location of different customer distributions given alternative pricing systems and different market structures. The optimum location of industry is shown to depend upon the pricing policies of the industry in question as well as on the distribution of customers, the shape of their demand curves, and the nature of the delivery cost functions. It follows that the standard location theory which is predicated chiefly on cost factors is deficient. The main contributions of this dissertation will, therefore, be: (1) To focus on the relationships between changes in the distribution of customers m d changes in the nature of the demand and delivery cost functions; in turn, their total impact on the decision of firms regarding location will be uncovered. (2) To determine the relationship between the elasticities of spatial individual demands and the elasticity of spatial aggregate demand towards the end of ascertaining what would be the optimum location choice in an industry. (3) To evaluate a monopolist's optimum location under alternative pricing policies and shapes of demand and delivery cost functions. (4) To evaluate different location choices under different pricing strategies. (5) To demonstrate that location under uniform delivered prices depends essentially on the nature of the delivery cost function. Specifically a manufacturer would locate between the median and the mean, exactly at the median or between the median and the mode depending upon whether the delivery cost function is respectively concave, linear or convex. (6) To elaborate on why an industry moves from the median towards the mean or why it typically ends up somewhere in between the two locations with no further movement to the mode or the mean of the distribution of the population (buyers). The dynamics of the location process will be considered in detail in this dissertation.