Manufacturing & Industrial Location Theory – Chapter 10 Questions 6 lectures left! Reference map Location Theory Spatial competition: linear market Weberian location theory

Linear Market Competition The importance of location in spatial competition: Linear market H. Hotelling’s Model (The Ice Cream Vendor on the beach) Picture a crowded beach….

Where should ice cream vendors locate? Ivan lifts a lot of weights… And the beach with an economic geographer...

Hotelling’s Ice Cream Vendor Problem Famous urban economic geographer doing ice- cream vendor field work Pre-computational field evidence remote sensing and recording device Let’s make some assumptions before we start looking for ice cream vendors… or anything else

Spatial competition in a linear market Uniform distribution of ice cream consumers on beach Demand for ice cream is inelastic (every consumer wants a cone no matter what the real price.) Market price is $1, tptn costs are $0.10 per metre Consumers will always buy at the closest market source Vendor is mobile but constrained to 5 locations No commercial inertia ABCDE

Spatial competition in a linear market ABCDE Time t1: Bob enters first. Units of demand / distance 10 Bob captures entire market

Spatial competition in a linear market ABCDE Time t2: Peter enters market. Units of demand / distance 10 Bob already in market at position A. Where should Peter locate?

Spatial competition in a linear market ABCDE Time t2: Peter enters market. Units of demand / distance 10 Bob already in market at position A. Where should Peter locate? Bob Peter Bob Peter

Spatial competition in a linear market ABCDE Time t3: Bob Retaliates and Moves Units of demand / distance 10 Bob already in market at position A. Peter in market at B Bob Peter Bob relocates to C Bob Peter

Spatial competition in a linear market ABCDE Time t4: Peter Retaliates and Moves to C Units of demand / distance 10 Peter in market at B Bob Peter Bob in market at C Peter retaliates and moves to C Bob Peter

Spatial competition in a linear market From free market to regulated markets State establishes market locations Peter and Bob apply for and receive a centrally planned market stall, exclusive access for the season for a fee ABCDE Peter Bob Peter

Spatial competition in a linear market Aggregate travel for consumers is reduced, improving welfare ABCDE Peter Bob Peter Bob Peter

Alfred Weber, 1909 Theory of the Location of Industries Assumptions Isotropic surface Single product plant Localized raw materials Single point market Labour is available Tpt costs a function of weight and distance Focus on transportation costs

Alfred Weber, 1909 One market, one localized RM source Ubiquitous raw material→ market orientation Pure RM →anywhere from RM location to market location Are we sceptical? Assuming no terminal costs! Assuming FR on RM= FR on FP Gross RM →RM orientation

Alfred Weber, 1909 Material index Material/market orientation >1 <1 =1?

Alfred Weber, 1909 One market, two localized RMs Let’s assume two localized RM sources, S 1 & S 2 Pure RMs, equal parts of FP weight

Alfred Weber, 1909 One market, two localized Gross RMs Let’s assume two localized Gross RM sources, S 1 & S 2 Gross RMs, 50% weight loss for each S 1, S 2, or M = $4

Transport cost matrix: industrial location at point M Destination Origin S1S2M S1$2 S2$2 M Total Tptn Cost $4

Transport cost matrix: industrial location at point S1 Destination Origin S1S2M S1$0$1+1+ 2=4 S2$2 M Total Tptn Cost $4