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The Optimum Size of a Producer Service Firm Facing Uncertain Demand

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  • D Phillips
  • A D MacPherson
  • B Lentnek

Abstract

In this paper we present a theory of optimum size and number of clients for a producer service firm performing maintenance and repair services for clients in the manufacturing sector. The theory holds that scale economies vary directly with the level of contact requirements for service delivery. This is illustrated by a model of a monopoly repair specialist in which frequency of breakdown (and therefore client demand for service) is stochastic. Comparative statics are used to draw testable hypotheses from the model which, if extended to a multisite case, may serve as a portion of a general model of producer service location.

Suggested Citation

  • D Phillips & A D MacPherson & B Lentnek, 1998. "The Optimum Size of a Producer Service Firm Facing Uncertain Demand," Environment and Planning A, , vol. 30(1), pages 129-141, January.
    • Handle: RePEc:sae:envira:v:30:y:1998:i:1:p:129-141
    DOI: 10.1068/a300129
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    References listed on IDEAS

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    1. Adrian Esparza & Andrew J. Krmenec, 1994. "Business Services In The Space Economy: A Model Of Spatial Interaction," Papers in Regional Science, Wiley Blackwell, vol. 73(1), pages 55-72, January.
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    Cited by:

    1. Robert Bennett & William Bratton & Paul Robson, 2000. "Business Advice: The Influence of Distance," Regional Studies, Taylor & Francis Journals, vol. 34(9), pages 813-828.
    2. Robert J. Bennett & Colin Smith, 2004. "SPATIAL MARKETS FOR CONSULTANCY TO SMEs," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 95(4), pages 359-374, September.
    3. Makoto Okumura & Makoto Tsukai, 2014. "Business service location with spatially stochastic demands: agglomeration economies generated by interaction costs and localized uncertain demand – an optimal stock location model approach," Chapters, in: Charlie Karlsson & Börje Johansson & Kiyoshi Kobayashi & Roger R. Stough (ed.), Knowledge, Innovation and Space, chapter 7, pages 160-179, Edward Elgar Publishing.
    4. Piet H. Pellenbarg & Paul J. M. Van Steen, 2004. "The Netherlands in Maps," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 95(3), pages 355-355, July.

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