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

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  • Arthur Huang
  • David Levinson

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 noncooperative 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 arise 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, 2011. "Why Retailers Cluster: An Agent Model of Location Choice on Supply Chains," Environment and Planning B, , vol. 38(1), pages 82-94, February.
    • Handle: RePEc:sae:envirb:v:38:y:2011:i:1:p:82-94
    DOI: 10.1068/b36018
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    Cited by:

    1. David Levinson & Arthur Huang, 2012. "A Positive Theory of Network Connectivity," Environment and Planning B, , vol. 39(2), pages 308-325, April.
    2. 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.
    3. Arthur Huang & David Levinson, 2008. "An Agent-based Model of Retail Location with Complementary Goods," Working Papers 000056, University of Minnesota: Nexus Research Group.
    4. James Fain, 2023. "Should retail stores locate close to a rival?," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 18(1), pages 129-162, January.
    5. Yu-Chih Lin & Feng-Tyan Lin, 2014. "A Strategic Analysis of Urban Renewal in Taipei City Using Game Theory," Environment and Planning B, , vol. 41(3), pages 472-492, June.

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    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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