Manufacturing & Industrial
Location Theory – Chapter 10
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Questions
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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?
 And the beach with an economic geographer...
Ivan lifts a lot of weights…
Hotelling’s Ice Cream Vendor Problem
Let’s make some
assumptions before
we start looking for ice
cream vendors… or
anything else
Famous urban economic
geographer doing icecream vendor field work
Pre-computational field
evidence remote sensing
and recording device
Spatial competition in a linear market
A
B
C
D
E
 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
Spatial competition in a linear market
Time t1: Bob enters first.
A
B
10
C
D
E
Units of demand / distance
10
10
10
6
Bob captures entire market
5
cost
4
3
2
1
0
0
10
20
distance
30
40
Spatial competition in a linear market
Time t2: Peter enters market.
A
B
10
C
Units of demand / distance
10
10
Bob already in market at position A.
Where should Peter locate?
D
E
10
Spatial competition in a linear market
Time t2: Peter enters market.
A
B
C
D
E
Peter
Bob
10
Units of demand / distance
10
10
Bob already in market at position A.
10
6
Where should Peter locate?
5
cost
4
3
2
1
0
0
Bob
10
Peter
20
distance
30
40
Spatial competition in a linear market
Time t3: Bob Retaliates and Moves
A
B
C
Peter
10
E
Bob
Units of demand / distance
10
10
Bob already in market at position A.
10
4.5
4
Peter in market at B
3.5
3
cost
Bob relocates to C
D
2.5
2
1.5
1
0.5
0
0
10
20
30
distance
Peter
Bob
40
Spatial competition in a linear market
Time t4: Peter Retaliates and Moves to C
A
B
C
Peter
10
D
E
Bob
Units of demand / distance
10
10
10
3.5
3
Peter in market at B
Bob in market at C
Peter retaliates and moves to C
cost
2.5
2
1.5
1
0.5
0
0
10
Peter
20
distance
30
Bob
40
Spatial competition in a linear market
A
B
Peter
C
Peter
D
Bob
E
Bob
 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
Spatial competition in a linear market
A
B
Peter
C
Peter
D
E
Bob
Bob
 Aggregate travel for consumers is reduced, improving
welfare
3
2.5
cost
2
1.5
1
Peter
0.5
Bob
0
0
10
20
distance
30
40
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
Wt . localized RM
MI 
Wt . FP
 >1
 <1
 =1?
Alfred Weber, 1909
One market, two localized RMs
 Let’s assume two localized RM sources,


S1 & 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, S1 & S2



Gross RMs, 50% weight loss for each
S1, S2, or M =
$4
Transport cost matrix: industrial
location at point M
Destination
Origin
S1
S2
M
S1
$2
S2
$2
M
Total Tptn
Cost
$4
Transport cost matrix: industrial
location at point S1
Destination
Origin
S1
S1
$0
S2
$2
S2
M
$1+1+
2=4
M
Total Tptn
Cost
$4