This paper develops a two-dimensional spatial framework to explore the firms' optimal locations and optimal attributes of basic products under linear transportation costs, in which firms have the technique of flexible manufacturing and engage in spatially discriminatory pricing. We can observe...

In standard models of New Economic Geography the overall regional price index in the centre is lower than in the periphery, because trade in manufacturing imposes transportation costs whereas trade in agriculture is assumed to be costless. Since real world observations suggest higher overall...