Location Models and Theories. Iron ore mines, selling ice cream on the beach and erotica shop locations

Transcription

1 Location Models and Theories Iron ore mines, selling ice cream on the beach and erotica shop locations

2 Weber and Transport Costs Advantages and Disadvantages of Truck What is best transported by truck Advantages and Disadvantages of Train What is best transported by train? Advantages and Disadvantages of Ship What is best transported by ship?

3 When do you change transport modes for your product? Different transportation modes have different cost functions Road, rail and maritime transport have respectively a C1, C2 and C3 cost functions While road has a lower cost function for short distances, its cost function climbs faster than rail and maritime cost functions At distance D1, it becomes more profitable to use railway transport than road transport At distance D2, maritime transport becomes more advantageous Point D1 is generally located between 500 and 750 km of the point of departure while D2 is near 1,500 km.

4 Terminal Costs, Freight On Board (FOB) Terminal Costs - costs of loading and unloading usually thought of as a fixed cost. They do not vary with distance shipped. Freight On Board - price of a good is the combination of the factory costs and the shipping costs from the factory to the consumer. The consumer pays for the freight transport costs. Consequently, the price of a commodity will vary according to transportation costs Line Haul Costs - costs that vary with distance shipped, i.e., costs of moving goods and people once they are loaded on the vehicles Tapering Principle actual costs (terminal and line) of transport increase at a decreasing rate as fixed costs are spread over longer hauls. Tapering occurs over the long haul

5 Hotelling s Model Suppose there is a beach a mile long There are two ice cream vendors Where would they locate on the beach to maximize their sales? We can use Hotelling in Presidential politics.

6 Hotelling s Model continued Morgantown, WV CH City Hall, MC Municipal Court, FC Family Court Questions Why do we observe this spatial concentration of erotica shops in Morgantown? Why is erotica most valuable at those locations? What role does the environment or neighbors play, if any?

7 Hotellings Model continued Morgantown, WV Notice the three X's: they mark the location of three erotica outlets. High Street is where all the main downtown retailers locate, and it has the heaviest traffic flow of anywhere in town. Notice that the X's seem to be concentrated in the same area.

8 Hotelling s Model continued Morgantown, WV Hotelling's model of spatial competition. Like the ice cream vendors on the beach or the shoe stores at the mall, the competitors wind up locating next to each other. The stores want to be close to High Street, but not on High Street because the stores balance wanting to be seen by their potential customers while their customers don't want to be seen going in/out of these stores. Perhaps erotica stores are more likely to be robbed, so they locate as close as they can to the courts and police as a deterrent to thieves.

9 Lösch's Model Zone of Profitability firms will identify a zone of profitability (not just a point) where income will outpace costs Lösch looks more narrowly and separately at threshold, range and hexagonal hinterlands Creates a much more complex model Lösch focused on maximizing consumer welfare and creating an ideal consumer landscape where the need to travel for any good was minimized and profits were held level, not maximized to accrue extra