Who's Afraid of Virginia Woolf? is set on the campus of New Carthage in New England because it is the site of many of America's best colleges, the home of the oldest, most historical sites in America, and the site of the Revolutionary War. It is both a venue for academia...
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and bloodshed, two recurring themes of the play.
For example, George makes reference to the "Punic Wars" in Act II. Incidentally, these wars took place in the city-state of Carthage, which was ravaged by war (there were three Punic Wars) and finally destroyed by the Romans. As such, New Carthage is an ancient civilization destroyed by war. Albee is saying that New England is headed for the same result as New Carthage because of nuclear war, genetic engineering, or a lack of morality.
These were the threats that faced the U.S. and the U.S.S.R. in 1962, the year the play was written. If George and Martha stand for George and Martha Washington, then Nick stands for Nikita Kruschev, the prime minister of the U.S.S.R. So, the play pits couple against couple, history against biology, the old against the young, the U.S. against the U.S.S.R. Words, therefore, are weapons. And the imaginary son stands for future generations. All could have been destroyed by a touch of a button or the drop of a word.
New England is a fitting setting for an absurdist play set in a college town as it would be on the front lines of a nuclear war--close to New York and Washington D.C., two certain targets for the U.S.S.R.'s ICBMs. It is the oldest part of the country, a site of history, threatened by destruction by the new kid on the block, the scientifcally-based communist superpower.