JPG1607H1
Geography of Competition
University of Toronto
Autumn 2014
Course Outline
(last revised 19 July 2014)
Description
Planners and human geographers often find themselves confronted by questions about the impacts of business
competition, innovation, and reorganization on the local or regional economy. Sometimes, these questions arise in the
context of transportation or environmental policy; how, for example, might a given climate change initiative affect the
location and scale of operation of business? Other times, these questions arise in the context of land-use policy; how, for
example, might a new sustainable planning initiative affect the urban economy overall? In practice, these questions—
pressing as they are these days—can be remarkably difficult to answer. We can answer them but we we have to think
carefully about our analysis and the assumptions that underlie it. In a fundamental sense, these are questions about how
firms come to be at the places where they produce, distribute, or sell their goods or services? How, when, and why does
competition among firms as well as the impact of firm siting on the siting of their suppliers and customers, lead to
localization (clustering) of firms in geographic space, the growth of some places (e.g., some cities or districts), and the
decline of others? Such questions are central to an area of thought known as competitive location theory. A spatial
(regional) economy incorporates "shipping cost" which I here take to include costs related to search, freight, insurance and
brokerage, storage, installation and removal, warranty and service, and arbitrage profit. As a result, the effective or
delivered price of a firm's products or inputs, inclusive of shipping costs, may well vary locally. This course focuses on how,
as a result of competition, location and clustering shape and are shaped by local prices.
When geographers see farms in a locale all producing the same crop, say celery, they often think the cause is an
advantageous soil, hydrology, climate, or perhaps circumstances that have produced a culture, institutions, and/or
practices that result in celery production. When urban planners see suppliers to the interior redecorating industry localized
in one area of a city, they may understand it as the outcome of amenities and services that attract those suppliers. When
businesses plan the location of a new factory, warehouse, or store, they typically take prices and costs as given. When
regional planners today strategize with respect to trade liberalization and globalization, they look to support localizations
(clusters) of kindred businesses, often with a focus on the kind of jobs that require creative skills and pay well.
To me, it is "only natural" to ask whether and how these processes might in fact operate similarly. In so doing, we begin to
elaborate a theory of location general enough to explain a range of phenomena. What is the similarity here? In my view,
none of the descriptions above mentioned an important process in common: namely how the location of a firm or farm
affects prices locally: including the prices of commodities sold, the wages paid to labor, the market rents paid by firms for
their sites, or prices of other inputs. Even if we assume that each firm individually is in a competitive market—that is, the
firm is a price-taker—as more firms join a geographic cluster, they do collectively affect prices locally. At the core of this
course is the idea that the common process underlying all of these is the way in which localization shape prices which in
turn impacts on localization itself.
An area of scholarly study typically has four components.
Ideas: The intellectual frameworks, concepts, and principles we use to simplify and structure our thinking.
Voices: The syntheses (application of ideas) offered by principal scholars in the field.
Methods: The deductive (logical) and inductive (empirical) tools that we use to identify, interpret, confirm, and analyze
processes under study.
Data: The sources of information that we use to explore and confirm.
The emphasis in this course is mainly on ideas, voices, and methods.
Competitive location theory has many applications. Businesses need to understand how competition will drive them and
their competitors into particular spatial patterns even where the patterns are not necessarily the most profitable, or
otherwise best, for an individual firm. Urban planners similarly need to anticipate how markets might react to a particular
plan or policy initiative, how any why growth might be linked to inequality, and issues of environmental degradation and
sustainability. Economic geographers and regional scientists need to understand how and why the geography of markets
might change as a result of trade liberalization or other initiative. Urban studies scholars are interested in how and why an
urban economy (that is, the production and allocation of goods and services, and distribution of income) changes.
Course objectives
To introduce students to the principal concepts, models, and findings in competitive location theory; to develop a facility
with important models in the area; to draw implications for planning and public policy; to better understand how deductive
theories are based on assumptions, and how theories of location can be compared by examining their assumptions; to
better understand the relevance of geography in economic thought.
By the end of the course, students often say that the intricate models developed here are interesting, insightful, and even
fun or provocative. They report that the excel workbooks are central in coming to understand the models. Graduates often
say, later in their careers, that this course prepared them well to do studies in regional economic development that are
highly valued by their client or employer. Other students say that that a principal benefit of the course is their ability to
analyze issues of trade and business activity in the context of public policy and regional development.
Recommended preparation
An undergraduate degree that includes the equivalent of a specialist program in City Studies, Economics, Geography,
Management, Planning, or Urban Studies
An undergraduate course in economics; having taken a course in intermediate microeconomics is helpful.
A first undergraduate course in calculus is also helpful, although we do not do mathematical derivations in this course.
Access to (and a basic working knowledge of) a version of Microsoft Excel that incorporates the Solver add-in: e.g., at least
Office 2003 for windows, or Office 2004 for mac. This course makes extensive use of the Solver routine built into that
version of Excel. A newer version of Excel may be used, but make sure that you have the corresponding Solver add-in.
Exclusions
None
Approach
The purpose of this course is to reinterpret competitive location theory in a way that (1) makes it relevant and accessible to
graduate students in geography, planning, management, economics, and other associated disciplines and (2) focuses
attention on central problems and questions in this area of scholarship. Competitive location theory is characterized by use
of a theoretical model, something students from human geography and other social science disciplines can find mystifying,
impenetrable, inappropriate, "unrealistic", or “too deterministic”. Location theorists favor a parsimonious writing style—at
its very best, breathtakingly insightful—that students often see as dense or terse. This course attempts to overcome
aspects of that by casting models in terms students can more readily understand. The course uses symbolic spreadsheets
(Microsoft Excel workbooks) to illustrate models. The course is run as a series of weekly workshops focused on the analysis
and interpretation of models. Students are expected to have done a preliminary reading in advance of the lecture and to be
able to contribute to discussion of the models in class.
The course is run as a series of weekly classes and discussions using a “flipped classroom” approach. Students are expected
to have done the readings for that week in advance of the lecture. Classes are used to “problem solve”: that is, to identify
and assess important new concepts in the readings that week. Since course materials are available in mobile format (.html),
students will be able to use smartphones, tablets, and laptop computers in the classroom to participate in the assessment
of pertinent information, concepts, and procedures.
Students find it helpful to bring a laptop computer to class with the reading (PDF) and the workbook (XLSX) files installed.
Teaching timetable
Two-hour workshop weekly
Topics
This course is concerned with theories of location that are focused on prices, applicable to any competitive firm, and that
might be empirically tested. The subject matter of the course includes:
Class: Topic (Problem)
1: Branch location
2: Transportation logistics
3: Price differences
4: Multimarket equilibrium
5: Factory location
6: Insurance and organization
7: Market areas
8: Uncertainty in markets
9: Agriculture and land rent
10: Land and labor substitution
11: Market saturation
Course textbook
Miron, J.R. 2010. The Geography of Competition: Firms, Prices, and Localization. New York NY: Springer.
From a University of Toronto computer connection, this book can be read chapter by chapter online or downloaded
without charge through http://www.springerlink.com/content/978-1-4419-5626-2 - section=673711&page=1
If you wish, you may also purchase a softcover print copy of this book ("MyCopy") for $24.99 US at this site.
Book chapters and (accompanying excel workbooks) are also available through the course website at portal.utoronto.ca.
All materials are password-protected. For each item, the password is m5r2n4.
Important Journals in the field
American Economic Review
Annals of Regional Science
Geographical Analysis
Growth and Change
Journal of Economic Geography
Journal of Regional Science
Journal of Urban Economics
Professional Geographer
Regional Science and Urban Economics
Transactions of the Institute of British Geographers
Urban Studies
Instructor
Professor John Miron
Department of Human Geography
E-mail: [email protected]
Office: MW364
Phone: 416 287 7311.
Office hours
Mondays and Wednesdays, 9-5
Course website
This course makes use of Blackboard.
http://portal.utoronto.ca
Please refer to the course website there regularly for updated course information and materials.
E-mail correspondence
Students typically e-mail the instructor with queries about the lectures, assignments, and tests. Normally, e-mail queries
should be short: that is, require an answer of only one sentence or two. If your query is longer than that, please phone me
or drop by my office rather than e-mailing. I endeavour to reply to queries in a timely fashion. Please note that I usually
check my e-mail first thing each Monday, Wednesday, and Friday morning. At other times, I check e-mails only sporadically.
I do not read e-mail messages from home, and therefore typically do not respond on evenings and weekends. I endeavour
to reply to all queries. However, I often get overwhelmed with e-mail just before an exam or an assignment due date: in
such cases, it is not possible to respond to every query. To avoid disappointment, please send your query well in advance of
such dates. Where the query might be of interest to other students in the course, I may post the query (anonymously) and
my reply for the benefit of all students in the course FAQ. Before e-mailing a query to me, please check to see whether the
query has already been posted in the FAQ document on the course web site. If you do not want your query posted in this
way, please make that clear in your query.
Reading Schedule
Wk: Readings
1: Chapter 2 (Greenhut-Manne). GoCChapter02s.xls
2: Chapter 3 (Hitchcock-Koopmans) . GoCChapter03s.xls
3: Chapter 4 (Cournot-Samuelson-Enke). GoCChapter04s.xls
4: Chapter 5 (Samuelson-Takayama-Judge). GoCChapter05s.xls
5: Chapter 6 (Weber-Launhardt). GoCChapter06s.xls
6: Chapter 7 (Marshall-Lentnek-MacPherson-Phillips). GoCChapter07s.xls
7: Chapter 8 (Hotelling-Lösch). GoCChapter08s.xls. Proposal due by start of class.
8: Chapter 9 (Economides-Siow). GoCChapter09s.xls
9: Chapter 10 (Thünen-Lee-Averous). GoCChapter10s.xls
10: Chapter 11 (Thünen-Beckmann-Samuelson). GoCChapter11ABCs.xls. GoCChapter11Ds.xls. GoCChapter11Es.xls
11: Chapter 12 (Thünen-Miron) . GoCChapter12s.xlsx
Grading Scheme
This course includes up to three graded components: paper proposal, term paper, and an optional final examination. The
paper proposal is worth 20%. A single numerical grade is awarded for the term paper. Four numerical grades are awarded
for each of the four final examination questions. Each student must complete the paper proposal and at least one of the
term paper and final examination. If the student completes only one of term paper or final examination, that component is
worth the remaining 80%. If the student completes all three components, each final examination question counts toward
the final grade only where it improves the student's overall grade; in such cases the weight of the term paper is reduced by
20 marks for each final examination question used. For example, consider a student who scores 75% on the proposal, 80%
on the term paper, and has one final examination question that scores 85% (that is, more than 80). The student's final
grade, before any bonus marks, would be 75(20) + 80(60) + 85(20) = 80.
Proposal
Each student will complete a proposal for a term paper. The proposal normally will not exceed 1200 words in length. It will
(1) clarify the research question to be addressed and explain its importance or significance, (2) indicate the key literature to
be reviewed, (3) sketch a methodology, and (4) suggest the potential findings and their significance for competitive
location theory. Proposals are normally submitted as an email attachment: PDF format preferred.
Term paper
Students may submit a term paper. The term paper normally will be about 5,000 words in length. It will include (1) the
research question addressed and its importance or significance, (2) the key literature and its findings, (3) methodology, and
(4) findings gained and their significance for competitive location theory. Any deviation from the proposal should be
identified and explained. Term papers are normally submitted as an email attachment: PDF format preferred.
Final examination
An optional final examination will be scheduled in December. It will be two hours long and cover material from the lectures
and readings for the term. Students will answer 4 questions, each potentially worth 20 marks toward the final course
grade. Students may use handwritten notes, texts, and photocopied material in the examination. No calculators,
organizers, or other electronic devices are permitted.