We analyse the effect on agglomeration tendencies of allowing multi-region
firms in a standard trade and location model, the core-periphery (CP) model
developed by Kurgman (1991). The introduction of horizontal multi-region f
irms mitigates the agglomeration effects found in the CP model by reducing
the range of trade costs for which the core-periphery equilibrium occurs. T
he introduction of vertical multi-region firms that separate the location o
f headquarters and plants has two counteracting effects. While headquarters
exhibit a strong tendency to concentrate, plants tend to spread out. The e
quilibrium is always asymmetric in spite of the underlying symmetry of the
model.