Impact of Information Costs on Business Agglomeration: A Case Study of Jewelry Stores in Major Urban Areas of Wuhan

The Agglomeration is a kind of institutional arrangement to reduce the search costs. Taking the space factor into account to think about the agglomeration, we find that the location of agglomeration does not distribute randomly, and it is affected by the display costs and the search costs. This article took the agglomeration of the jewelry stores in major urban areas of Wuhan as a case, to study the impact of search costs and display costs to business agglomeration. Firstly, the edge of the agglomeration of the jewelry stores in major urban areas of Wuhan is between 500-1 000 m. And the increasing of the search costs does not make contribution to the agglomeration neither in nor out of the agglomeration area. Secondly, neither in nor out of the agglomeration area, there is a negative effect from the display costs to the agglomeration. When the distance between firms turns more than the scope of the agglomeration, the impact on the agglomeration from the display costs has a trend of diminishing marginal effect. Thirdly, the location of agglomeration does not distribute randomly. It likes to be located in the areas with groups of potential customers or being lower display costs, which helps to improve the search efficiency and reduce the cost of display.