An Agent-based Model of Retail Location with Complementary Goods

Arthur Huang and David Levinson

No 56, Working Papers from University of Minnesota: Nexus Research Group

Abstract: 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.

Keywords: clustering; agent-based model; location choice; power-law distribution pattern; retailing (search for similar items in EconPapers)
JEL-codes: L22 R30 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cmp, nep-cse, nep-geo, nep-ind, nep-mkt and nep-ure
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Published n Complex Sciences: First International Conference, Complex 2009, Shanghai, China, February 23-25, 2009. Revised Papers, Part 1. (Lecture Notes of the Institute for Computer Sciences, Social Informatics, and Telecommunications Engineering) (ed. Jie Zhou).

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http://hdl.handle.net/11299/179991 First version, 2008 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:nex:wpaper:clustercomplements

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