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articles: Logistics cost, consumer demand, and retail establishment density


  • Chaug-Ing Hsu

    () (Department of Transportation Engineering and Management, National Chiao Tung University, 1001 Ta Hsueh Road, Hsinchu, Taiwan 30049, Republic of China)

  • I-Jin Tsai

    () (Department of Transportation Engineering and Management, National Chiao Tung University, 1001 Ta Hsueh Road, Hsinchu, Taiwan 30049, Republic of China)


This article develops models to formulate the optimal density of retail establishments by considering interactions between logistics cost and consumer demand. Commodities are assumed to be distributed from a depot directly or through single intermediate terminal to many retail establishments. Average logistic cost per item, consumer demand, and the interrelationship between them are analyzed. The optimal density of retail establishments and local terminals are determined by minimizing average logistic cost, or maximizing total supply subject to the demand-supply equality. The envelope curves for the optimal configuration strategies corresponding to different values of total market area and terminal cost are derived.

Suggested Citation

  • Chaug-Ing Hsu & I-Jin Tsai, 1999. "articles: Logistics cost, consumer demand, and retail establishment density," Papers in Regional Science, Springer;Regional Science Association International, vol. 78(3), pages 243-263.
  • Handle: RePEc:spr:presci:v:78:y:1999:i:3:p:243-263
    Note: Received: 3 October 1996

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    Cited by:

    1. Alderighi, Marco & Piga, Claudio A., 2008. "Why should a firm choose to limit the size of its market area?," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 191-201, March.
    2. Li, Hui-Chieh, 2015. "Optimal delivery strategies considering carbon emissions, time-dependent demands and demand–supply interactions," European Journal of Operational Research, Elsevier, vol. 241(3), pages 739-748.
    3. Turkensteen, Marcel & Klose, Andreas, 2012. "Demand dispersion and logistics costs in one-to-many distribution systems," European Journal of Operational Research, Elsevier, vol. 223(2), pages 499-507.

    More about this item


    Logistics cost; consumer demand; retail establishment density; terminal; demand-supply interaction;

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise


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