Firm behavior different from RPC
I want to analyze the impact of a new firm on a local community. The new firm will purchase the exact same inputs as is average for the industry and in the same proportion.
However, unlike the average firm in the industry in the local community, the new firm will buy most of its inputs from outside the community (even though plenty of these inputs can be found locally). This might be because, say, the new firm has a preexisting link with input suppliers that it always uses.
For instance, if the average firm in the industry buys, say, 50% of its needed accounting services locally (as for accounting services RPC = 0.5), the new firm might buy 0% of accounting services locally as it always uses an accounting firm far away.
What is the best way to model this one new firm?
Thank you.
-
Hello Eric,
It sounds like the best methodology to use given your detailed information about the business is going to be Analysis by Parts (ABP). This will allow you to use that Industry Spending Pattern Event and edit commodities that won't be purchased in region like the other firms might typically do. The article ABP: Using an Industry Spending Pattern will walk you through the basics and Editing Industry Spending Pattern Events will give you some additional information on how to make those edits. Inside the Industry Spending Pattern you can add and delete commodities that are purchased by the business as well as adjust the percentage that is spent locally on them. The default will be the SAM, but you can change this to another value like 0% or delete it completely if it won't be purchased in your region.
Please sign in to leave a comment.
Comments
3 comments