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An Agent-based Model of Retail Location with Complementary Goods

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  • 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 proÞts. Our Þndings 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.

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File URL: http://nexus.umn.edu/Papers/ClusterComplements.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 000056.

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Date of creation: 2008
Date of revision:
Publication status: Published n Complex Sciences: First International Conference, Complex 2009, Shanghai, China, February 23-25, 2009. Revised Papers, Part 1. (Lecture Notes of the Institute for Computer Sciences, Social Informatics, and Telecommunications Enginering) (ed. Jie Zhou).
Handle: RePEc:nex:wpaper:clustercomplements

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Related research

Keywords: clustering; agent-based model; location choice; power-law distribution pattern; retailing;

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References

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  1. Head, C. Keith & Ries, John C. & Swenson, Deborah L., 1999. "Attracting foreign manufacturing: Investment promotion and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 197-218, March.
  2. Arthur Huang & David Levinson, 2008. "An agent-based retail location model on a supply chain network," Working Papers 000037, University of Minnesota: Nexus Research Group.
  3. Andersson, Claes & Hellervik, Alexander & Lindgren, Kristian, 2005. "A spatial network explanation for a hierarchy of urban power laws," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 345(1), pages 227-244.
  4. Maskell, Peter & Malmberg, Anders, 1999. "Localised Learning and Industrial Competitiveness," Cambridge Journal of Economics, Oxford University Press, vol. 23(2), pages 167-85, March.
  5. S. Redner, 1998. "How popular is your paper? An empirical study of the citation distribution," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 4(2), pages 131-134, July.
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