Imitation in location choice

primary competitor, has a location (Scheibene, 2007, personal communication).

Given that firms in the real world condition location decisions on observed locations
of others, it is natural to investigate whether imitation can be rationalized within
the profit maximizing framework. The model presented in Section 2 tackles this
problem and the more important issue, from a policy perspective, of the aggregate
consequences of shortcut decision rules, or heuristics. The central question is whether
under-utilization of urban resources results from a process in which firms consider
employing those resources and wind up deciding they are unprofitable, or whether
the imitation heuristic, perhaps suitable for some investment environments, leads to
inefficient clustering in favored suburban locations and systematic neglect of entire
regions within cities.

The magnitude of the abandoned property problem in US central cities is apparent
in the economics literature as early as the 1970s (Stegman and Rasmussen, 1980).
Whereas the model of Caplin and Leahy (1998) provides a general rationalization
for abandonment or under-utilization, the model in this paper has the advantage
of identifying conditions in the external environment necessary for tension to exist
between the individual advantages and social consequences (in terms of aggregate
economic efficiency) of imitation.

4 Conclusion

The model presented in this paper draws on empirical accounts of spatial concentra-
tion in well-established retail centers of affluent suburbs by firms that inefficiently
overlook profitable opportunities in urban neighborhoods (Berg, 2007; Helling and
Sawicki, 2003; Sabety and Carlson, 2003; Francica, 2000; Weissbourd, 1999). Seeking
a better understanding of opportunistic information sharing that leads to imitation,

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