Agglomeration Economies and Location Decision-making of Firms in Location-triangle Approach

Daisuke Nakamura

The International Centre for the Study of East Asian Development (ICSEAD)


The location-triangle framework, which was originally established by Alfred Weber, has been expanded in various ways and generalized as the Weber-Moses location-triangle model. However, several essential elements, in particular, regarding agglomeration economies have been excluded from the model framework. This may cause a potential difficulty to connect location-triangle approach with recent more advanced spatial economic analysis. In this paper, an alternative hypothetical model is introduced to the location triangle framework with the notions of agglomeration economies and corresponding transportation costs. The alternative model framework enables the location-triangle model to deal with investigating modern complex industrial organizations. Further avenues of extension are also discussed. read more

JEL Classification: L14; O21; R30; R58

Keywords: Location-triangle model; agglomeration economies; transportation costs; firm location