Variable Transportation Rates and The Profit-Maximization Location Theory of The Firm

This paper examines the role of variable transportation rates on the independence between optimum location and demand. When transportation rates are a function of quantity and distance, it shows that the independence between optimum location and demand crucially depends upon whether the elasticities of transportation rates with respect to quantity are constant and identical ; and the ratio of marginal products is equal to the ratio of marginal transportation costs. This is quite different from the well-known Miller and Jensen result.