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An agent-based retail location model on a supply chain network

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  • Arthur Huang
  • David Levinson

    ()
    (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)

Abstract

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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File URL: http://nexus.umn.edu/Papers/Cluster.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by University of Minnesota: Nexus Research Group in its series Working Papers with number 000037.

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Date of creation: 2008
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Publication status: Published in working paper
Handle: RePEc:nex:wpaper:cluster

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Keywords: clustering; supply chain network; location choice; distribution pattern;

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References

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Cited by:
  1. Arthur Huang & David Levinson, 2008. "An Agent-based Model of Retail Location with Complementary Goods," Working Papers 000056, University of Minnesota: Nexus Research Group.

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