Transportation rates, market structure and the production-location decision : A note

This note examines the effects of market structure on production and location decisions of an oligopolistic firm. It shows that if transportation rates are a function of quantity shipped and distance traveled, a linearly homogeneous production function is not sufficient to ensure independence between the optimum location and market structure unless (i) the elasticities of transportation rates with respect to quantity shipped are constant and identical, and (ii) the ratios of marginal products to the marginal transportation costs are equal for each input. This results is significantly different from Hwang and Mai's in the constant transportation rates case.