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Aggregation of retail stores

Author

Listed:
  • Jensen, Pablo
  • Boisson, Jean
  • Larralde, Hernán

Abstract

We propose a simple model to understand the economic factors that induce aggregation of some businesses over small geographical regions. The model incorporates price competition with neighboring stores, transportation costs and the satisfaction probability of finding the desired product. We show that aggregation is more likely for stores selling expensive products and/or stores carrying only a fraction of the business variety. We illustrate our model with empirical data collected in the city of Lyon.

Suggested Citation

  • Jensen, Pablo & Boisson, Jean & Larralde, Hernán, 2005. "Aggregation of retail stores," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 351(2), pages 551-570.
    • Handle: RePEc:eee:phsmap:v:351:y:2005:i:2:p:551-570
    DOI: 10.1016/j.physa.2005.01.002
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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    Cited by:

    1. Duccio Piovani & Carlos Molinero & Alan Wilson, 2017. "Urban retail location: Insights from percolation theory and spatial interaction modeling," PLOS ONE, Public Library of Science, vol. 12(10), pages 1-13, October.
    2. Claudio-Pachecano, L. & Larralde, H., 2020. "Agglomeration or separation: Store patterns through an optimal location model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 542(C).
    3. Pramono, Ari & Oppewal, Harmen, 2021. "Where to refuel: Modeling on-the-way choice of convenience outlet," Journal of Retailing and Consumer Services, Elsevier, vol. 61(C).

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