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Why retailers cluster: An agent model of location choice on supply chains

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Author Info

  • Arthur Huang
  • David Levinson

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

Abstract

This paper investigates the emergence of retail clusters on supply chains comprised of suppliers, retailers, and consumers. Agent-based models are employed to study retail location choice in a market of homogeneous goods and a market of complementary goods. On a circle comprised of discrete locales, retailers play a non-cooperative game by choosing locales to maximize profits which are impacted by their distance to consumers and to suppliers. Our findings disclose that in a market of homogeneous products symmetric distributions of retail clusters rise out of competition between individual retailers; average cluster density and cluster size change dynamically as retailers enter the market. In a market of two complementary goods, multiple equilibria of retail distributions are found to be common; a single cluster of retailers has the highest probability to emerge. Overall, our results show that retail clusters emerge from the balance between retailers’ proximity to their customers, their competitors, their complements, and their suppliers.

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File URL: http://nexus.umn.edu/Papers/RetailPaper.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 201105.

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Date of creation: 2008
Date of revision:
Handle: RePEc:nex:wpaper:retailpaper

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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
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Related research

Keywords: retail clusters; agent-based model; location choice; distribution pattern;

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References

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  1. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  2. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
  3. QUINZII, Martine & THISSE, Jacques-François, . "On the optimality of central places," CORE Discussion Papers RP -907, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Cited by:
  1. Ben Fitzpatrick & Jason Martinez, 2012. "Agent-Based Modeling of Ecological Niche Theory and Assortative Drinking," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 15(2), pages 4.

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