ECONOMICS OF AGGLOMERATION

We address the fundamental question arising in geographical economics: why do economic activities agglomerate in a small number of places? T he main reasons for the formation of economic clusters involving firms and/or households are analyzed: (i) externalities under perfect compe tition; (ii) increasing returns under monopolistic competition; and (i ii) spatial competition under strategic interaction. We review what ha s been accomplished in these three domains and identify a few general principles governing the organization of economic space. A few alterna tive, new approaches are also proposed. (C) 1996 Academic Press, Inc.