Arthur Huang David Levinson () (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
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Clusters of business locations, which considerably impact daily activities, have been prominent phenomena. Yet the question of how and why Þrms cluster in certain areas has not been sufficiently studied. This paper investigates the emergence of clusters of business locations on a supply chain network comprised of suppliers, retailers, and, consumers. Krugman (1996) argued that urban concentration involved a tension between the centripetal and the centrifugal forces. Based on that notion, this research proposes an agent-based model of retailers' location choice in a market of homogeneous products. In this game, retailers endeavor to maximize their proÞts by changing locations. Retailers' distribution patterns are measured by entropy and cluster density. Simulation results reveal that as more retailers engage in the game, clusters autonomously emerge and the entropy of clusters increases. Once retailers exceed a certain number, average density of clusters begins to decline; all discrete clusters gradually merge to a large cluster, spreading out uniformly. This research thus Þnds that the centripetal force attracts retailers to supplier locations; with even more retailers entering the market, the centrifugal force disperses them. The sensitivity results on model parameters and consumers' demand elasticity are also discussed.
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Publisher Info
Paper provided by University of Minnesota: Nexus Research Group in its series Working Papers with number
000037.
Length: Date of creation: 2008 Date of revision: Publication status: Published in working paper Handle: RePEc:nex:wpaper:cluster
Contact details of provider: Postal: Dept. of Civil Engineering, 500 Pillsbury Drive SE, Minneapolis, MN 55455 Phone: +01 (612) 625-6354 Fax: +01 (612) 626-7750 Web page: http://nexus.umn.edu More information through EDIRC
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Nooteboom, B. & Gilsing, V.A., 2004.
"Density And Strength Of Ties In Innovation Networks: A Competence And Governance View,"
Research Paper
ERS-2004-005-ORG Revision, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
[Downloadable!]
Other versions:
Peter Maskell & Leïla Kebir, 2005.
"What qualifies as a cluster theory?,"
DRUID Working Papers
05-09, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
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