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

Arthur Huang and David Levinson

No 201105, Working Papers from University of Minnesota: Nexus Research Group

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.

Keywords: retail clusters; agent-based model; location choice; distribution pattern (search for similar items in EconPapers)
JEL-codes: L22 R30 (search for similar items in EconPapers)
Date: 2008
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Published in Environment and Planning b 38(1) pp. 82 - 94.

Downloads: (external link)
http://hdl.handle.net/11299/180013 first version, 2008 (application/pdf)

Related works:
Journal Article: Why Retailers Cluster: An Agent Model of Location Choice on Supply Chains (2011)
Working Paper: Why retailers cluster: An agent model of location choice on supply chains (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:nex:wpaper:retailpaper

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