We model the behavior of rational forward-looking agents in a spatial economy. The economic geography structure is built on Fujita et al. (1999)'s racetrack economy. Workers choose optimally what to consume at each period, as well as which spatial itinerary to follow in the geographical space....

In this paper, we develop an economic geography model in which firms sell product varieties with heterogeneous demands. We show that firms that sell products with higher demand choose to establish their plants in larger countries, which provide better access to the most frequently demanded and...