IZA DP No. 3258: On Pitchforks and Tomahawks
published in revised form in: Journal of Regional Science, 2011, 51 (2), 292-298
The core-periphery model by Krugman (1991) has two 'dramatic' implications: catastrophic agglomeration and locational hysteresis. We study this seminal model with CES instead of Cobb-Douglas upper tier preferences. This small generalization suffices to change these stark implications. For a wide range of parameters we find that the model exhibits instead a smooth and easily reversible transition from symmetry to agglomeration.