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An Agent-based Model of Retail Location with Complementary Goods


  • Arthur Huang
  • David Levinson

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


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

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    References listed on IDEAS

    1. Arthur Huang & David Levinson, 2011. "Why retailers cluster: an agent model of location choice on supply chains," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 38(1), pages 82-94, January.
    2. Maskell, Peter & Malmberg, Anders, 1999. "Localised Learning and Industrial Competitiveness," Cambridge Journal of Economics, Oxford University Press, vol. 23(2), pages 167-185, March.
    3. 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;EDP Sciences, vol. 4(2), pages 131-134, July.
    4. 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.
    5. 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.
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    More about this item


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

    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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