DEMAND AND LOCATION DECISION OF A MONOPSONISTIC FIRM

This paper examines the impact of demand on the location decision of a monopsonistic firm in the Weber-Moses triangle with one output and tw o inputs. When the distance of the plant location from the product mar ket is held constant and the expansion path is linear through the orig in, the analysis shows that as demand for output increases, the monops onist has an incentive to move the plant away from the monopsonized in put market and towards other markets. When the distance of the plant l ocation from the product market is a choice variable, the linearly hom ogeneous production function is not sufficient to ensure that the loca tion decision of the monopsonistic firm is independent of the demand f unction, These results differ significantly from the well-established results in location theory where the firm is a price taker in all the input markets.