Shopper City

The bulk of the literature on retail location looks at the topic from the perspective of either the retail firm or the individual shopper. Another branch of the literature examines the spatial distribution of retail activities within a city or region, drawing on either central place theory or the Lowry model, neither of which incorporates either markets or agglomeration economies. This paper looks at retail location from the perspective of a general equilibrium model of location and land use, with agglomeration economies in retailing. In particular, drawing on the Fujita-Ogawa (1982) model of non- monocentric cities, it develops a model of retail location, assuming that retail firms behave competitively, subject to spatial agglomeration economies. Locations are distinguished according to the effective variety of retail goods they offer. Shoppers are willing to pay more for goods at locations with greater effective variety, and in their choice of where to shop trade off retail price, product variety, and accessibility to home. Retail prices and land rents at different locations adjust to achieve spatial equilibrium.