Why Retailers Cluster: An Agent Model of Location Choice on Supply Chains

Presented at 89th Transportation Research Board Conference, Washington, DC, January 2010

20 Pages Posted: 5 Jan 2011 Last revised: 22 Jan 2011

See all articles by Arthur Huang

Arthur Huang

University of Minnesota - Twin Cities

David Matthew Levinson

affiliation not provided to SSRN

Date Written: January 26, 2010

Abstract

This paper investigates the emergence of retail clusters on supply chains comprised of suppliers, retailers, and consumers. An agent-based model is 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

JEL Classification: A1, R40, R41

Suggested Citation

Huang, Arthur and Levinson, David Matthew, Why Retailers Cluster: An Agent Model of Location Choice on Supply Chains (January 26, 2010). Presented at 89th Transportation Research Board Conference, Washington, DC, January 2010. Available at SSRN: https://ssrn.com/abstract=1734916

Arthur Huang

University of Minnesota - Twin Cities ( email )

420 Delaware St. SE
Minneapolis, MN 55455
United States

David Matthew Levinson (Contact Author)

affiliation not provided to SSRN

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