A Latent Auction Model of Firm Establishment Location Choice in the Greater Toronto Area

The paper presents a model of location choices of business establishments in the Greater Toronto Area (GTA). The model is of latent auction model, where the price and utility are jointly modelled in a random utility maximizing framework. Structural relationships between establishments by their industry classification and type (i.e., headquarters, subsidiary, branch, or single location) are explored through a generalized nesting correlation structure. This structure provides a mechanism for differentiating between branch and single location establishments, having seemingly similar functions, but differing in their allocation between industry and type nests. Location choice models are estimated for the full population of establishments in the GTA at the level of individual buildings. The scope of the model allows us to provide a range of insights into the location choice behavior of establishments, which were previously infeasible due to data limitations. We find that professional service establishments tend to locate near passenger rail stations (i.e., subway and LRT), while industrial establishments tend to locate near major highway interchanges