Using Taxes to Attract the Creative Class in the Presence of a Region-Specific Rent

We analyze interregional competition between two regions _A_ and _B_ that use taxes to attract a representative creative class member (the entrepreneur). This entrepreneur establishes firm in either region or this action guarantees her profit. However, if the locates then she also obtains stochastic, location-specific rent is high with positive probability low complementary probability. In setting, we accomplish three tasks. First, given values of tax rates, determine payoff for possible _A_. Second, ascertain when will locate both _B_. Finally, compute rate set specify condition which ensures