Retail Location Choice with Complementary Goods: An Agent-Based Model

This paper examines the emergence of retail clusters on a supply chain network comprised of suppliers, retailers, and consumers. An agent-based model is proposed to investigate retail location distribution in a market of two complementary goods. The methodology controls for supplier locales and unit sales prices of retailers and suppliers; a consumer’s willingness to patronize a retailer depends on the total travel distance of buying both goods. On a circle comprised of discrete locations, retailers play a non-cooperative game of location choice to maximize individual profits. Our findings suggest that the number of clusters in equilibrium follow a power-law distribution and that hierarchical distribution patterns are much more likely to occur than the spread-out ones. In addition, retailers of complementary goods tend to co-locate at supplier locales. Sensitivity tests on the number of retailers and retailers’ sequence of moving are also performed. JEL code: R30, L22 Key words: ...

• Type: Conference
• Year: 2009
• Where: COMPLEX
• Authors: Arthur Huang, David Levinson
• Keywords: Agent-based Model, COMPLEX 2009, Retailers, Supplier Locales, Theoretical Computer Science