Comput Econ (2011) 38:349–366 DOI 10.1007/s10614-011-9293-8 Border Collision Bifurcations in a Footloose Capital Model with First Nature Firms Anna Agliari · Pasquale Commendatore · Ilaria Foroni · Ingrid Kubin Received: 31 January 2011 / Accepted: 6 August 2011 / Published online: 28 August 2011 © Springer Science+Business Media, LLC. 2011 Abstract In this paper we extend the discrete time Footloose Capital model ana- lyzed in Commendatore et al. (Nonlinear Dyn Psychol Life Sci 11(2):267–289, 2007) by introducing “first nature firms”, i.e., firms that use locally specific blueprints and, therefore, are immobile. Due to the presence of first nature firms (symmetrically dis- tributed across the regions), the central dynamic map becomes a piecewise differen- tiable function: in addition to “standard” flip and pitchfork bifurcations also border collision bifurcations are possible and instances of multistability may emerge. Our analysis confirms and extends the results of Commendatore et al. (2007): (1) continu- ous time formulation hides complex dynamics patterns; (2) asymmetric distributions of industrial activity can be endogenously generated and are path dependent. Keywords Piecewise smooth map · Border collision bifurcations · New Economic Geography · Footloose Capital models 1 Introduction It was Krugman (1993a) who referred to Cronon’s famous book “Nature’s Metrop- olis: Chicago and the Great West” (Cronon 1991) and popularized the distinction A. Agliari Department of Scienze Economiche e Sociali, Catholic University, Piacenza, Italy P. Commendatore Department of Economics, University of Naples “Federico II”, Napoli, Italy I. Foroni (B ) Department of Metodi Quantitativi per le Scienze Economiche e Aziendali, University of Milano-Bicocca, Milan, Italy e-mail: ilaria.foroni@unimib.it I. Kubin Department of Economics, WU Vienna University of Economics and Business, Vienna, Austria 123