>The argument is that City A offers a discount deal for factory A to move there, so then City B has to offer a deal for factory B, and so on; whereas if neither

>The argument is that City A offers a discount deal for factory A to move there, so then City B has to offer a deal for factory B, and so on; whereas if neither of them had offered a deal they would both be better off. Classic prisoner's dilemma stuff. It's not a classic prisoner's dilemma, because you can play this game multiple times. It's an iterated prisoner's dilemma which can have a different outcome. Furthermore, you're talking about this as though the government making the most amount of taxes is the most optimal scenario. There are plenty of economists that disagree with this notion, because this cost is passed on to the consumer and thus consumers are worse off. In practice we don't actually see this happen either. In fact, this is how countries like Ireland managed to climb out of poverty. >There is a tendency for industry to congregate, but better ways need to be developed to deal with that than taxpayer bribery. Then I'd be happy to hear proposals that have a chance of working, but mostly what I see is countries like Germany happily taking advantage of the euro and brain drain, but they complain when other vignettes countries get some of the foreign businesses instead of them. I don't think there are better solutions that work without the government regulating absolutely everything. >Mittelstand Please explain a bit more how this avoids companies from congregating in certain areas.