Agglomeration or separation: Store patterns through an optimal location model

L. Claudio-Pachecano and H. Larralde

Physica A: Statistical Mechanics and its Applications, 2020, vol. 542, issue C

Abstract: The purpose of this paper is to show how different location patterns of stores emerge as a result of competition between retailers selling similar goods. Our model assumes the interactions between stores arise from the customer’s behavior. Two aspects were taken into account in characterizing customer’s choices: first, that the decisions depend on the total expected cost of buying the product under consideration; second, that there is consumer heterogeneity in regards to the reservation price each is willing to pay for each good. Retailers choose location and price as to maximize their total profit. Numerical evaluations show that reservation price distributions are determinant in the optimal location and in the behavior of equilibrium prices, which can increase, decrease or have a non monotonic behavior as the number of stores at the same location increases.

Keywords: Retail agglomeration and separation; Optimal price and location model; Price competition; Taste uncertainty; Consumer heterogeneity; Market size effect (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437119318825
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:542:y:2020:i:c:s0378437119318825

DOI: 10.1016/j.physa.2019.123366

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().