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

Author

Listed:
  • 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.

Suggested Citation

  • Arthur Huang & David Levinson, 2008. "Why retailers cluster: An agent model of location choice on supply chains," Working Papers 201105, University of Minnesota: Nexus Research Group.
  • Handle: RePEc:nex:wpaper:retailpaper
    as

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    File URL: http://hdl.handle.net/11299/180013
    File Function: first version, 2008
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    References listed on IDEAS

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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 1-4.
    2. Arthur Huang & David Levinson, 2008. "An Agent-based Model of Retail Location with Complementary Goods," Working Papers 000056, University of Minnesota: Nexus Research Group.

    More about this item

    Keywords

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

    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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