Chapter 8, Problem 1ED

Summary Introduction

Summary:

Company UA announced a competition to identify a new town for a new billion-dollar aircraft repairing base. This led to competition and many location biddings wars and when the company eventually left the place it led to a vacant place without a tenant and the state had access to all tools neatly arranged in the place.

To explain: The outcomes of the location bidding wars.

Explanation of Solution

Outcome of location bidding wars:

The location of industries is a big issue in Country U these days. All the communities are looking for new jobs from foreign organizations such as well-known car manufacturer Company M. Bidding wars are non-productive from the central economy perspective of the nation. There are many implications for the local public as they have to pay all the bills if the predicted success does not happen. These decisions are often without hearing the voice of the public and made by the political leaders of the community.

The economic analysis is made and the incentives against the benefits always might limit the giveaways. There are many downsides if there is a spread of incentives offered by almost all the cities, states, or countries. The limits on incentives are subjective to the situation of each locality and must be decided by analyzing each locality separately. Hence, the decision to limit incentives is subjected to the locations.