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By quadratic transportation costs I mean costs that rise by a factor of distance squared, i.e. at a faster than linear rate, with travel distance.
Perhaps you are right that other forces are involved in clustering this is only one theory. How could different theories be tested?
This video was enlightening, but ultimately gave me much more questions than answers. I get the basic idea of the balancing forces between product differentiation, market share, and nash equilibrium, but it seems to me that firms have a much greater tendency to cluster (car dealerships, big box stores, strip malls, etc) then separate, but it seems like a stretch that transportation costs (or search costs for digital goods) is the primary reason for this.
Can you elaborate on this please?
And by quadratic transportation costs, do you mean it's much less expensive for customers to travel outwards from a central location than to travel inwards or am I interpreting this too literally?