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An Agent-based Model of Retail Location with Complementary Goods

Author

Listed:
  • Arthur Huang
  • David Levinson

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

Abstract

This paper examines the emergence of retail clusters on a supply chain network comprised of suppliers, retailers, and consumers. An agent-based model is proposed to investigate retail location distribution in a market of two complementary goods. The methodology controls for supplier locales and unit sales prices of retailers and suppliers; a consumer's willingness to patronize a retailer depends on the total travel distance of buying both goods. On a circle comprised of discrete locations, retailers play a non-cooperative game of location choice to maximize individual profits. Our findings suggest that the number of clusters in equilibrium follow a power-law distribution and that hierarchical distribution patterns are much more likely to occur than the spread-out ones. In addition, retailers of complementary goods tend to co-locate at supplier locales. Sensitivity tests on the number of retailers and retailers' sequence of moving are also performed.

Suggested Citation

  • Arthur Huang & David Levinson, 2008. "An Agent-based Model of Retail Location with Complementary Goods," Working Papers 000056, University of Minnesota: Nexus Research Group.
    • Handle: RePEc:nex:wpaper:clustercomplements
    as

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    File URL: http://hdl.handle.net/11299/179991
    File Function: First version, 2008
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    References listed on IDEAS

    as
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    2. Arthur Huang & David Levinson, 2011. "Why Retailers Cluster: An Agent Model of Location Choice on Supply Chains," Environment and Planning B, , vol. 38(1), pages 82-94, February.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    clustering; agent-based model; location choice; power-law distribution pattern; retailing;
    All these keywords.

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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