On agglomeration in competitive location models

Agglomeration of facilities that compete with each other is common in practice, which suggests the existence of forces driving facilities to locate in clusters. Shopping centers and food courts are everyday examples. Although these agglomeration forces have been adequately analyzed and explained in the economic literature, operational research location models have not taken them into consideration as of today. This is particularly troublesome, as locations prescribed by these models are rather dispersed, which is in blatant disagreement with the examples that can be observed in real life. We present a selective review of the economic literature dealing with agglomeration forces acting in a linear market, classifying these forces into weak and strong. This paper demonstrates the sensitivity of competitive location models with respect to some assumptions that cause agglomeration or dispersion.