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

  • Arthur Huang
  • David Levinson

    ()

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

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
Download Restriction: no

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:
Publication status: Published in Environment and Planning b 38(1) pp. 82 - 94.
Handle: RePEc:nex:wpaper:retailpaper
Contact details of provider: 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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  1. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
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