The Brexit Game: Uncertainty and Location Decision

Abstract

This article aims to analyze the strategic decision about firms location choice faced with the uncertainty surrounding Brexit. We combine Evolutionary Game Theory (EGT) and spatial Agent-based Simulation (ABS) approaches with input-output analysis. Firms are competing in two different sectors: (a) crop and animal production; (b) financial service activities. We separate the European Union in manifold regions and consider the following factors in the decision making: (i) market potential; (ii) productive integration; (iii) labor costs and (iv) displacement cost. Firms assign weights to each of these factors. Our results suggest that in traditional sectors firms tend to seek unsaturated markets. In sectors related to services, the greater the uncertainty, the greater the likelihood that firms will move.