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Manufacturing

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Manufacturing & Industrial Location Theory Chapter 10. Questions. 6 ... One market, one localized RM source. Ubiquitous raw material market orientation ... – PowerPoint PPT presentation

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Title: Manufacturing


1
Manufacturing Industrial Location Theory
Chapter 10
  • Questions
  • 6 lectures left!
  • Reference map
  • Location Theory
  • Spatial competition linear market
  • Weberian location theory

2
Linear Market Competition
  • The importance of location in spatial
    competition
  • Linear market
  • H. Hotellings Model (The Ice Cream Vendor on
    the beach)
  • Picture a crowded beach.

3
Where should ice cream vendors locate?
  • And the beach with an economic geographer...

Ivan lifts a lot of weights
4
Hotellings Ice Cream Vendor Problem
Lets make some assumptions before we start
looking for ice cream vendors or anything else
5
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

6
Spatial competition in a linear market
Time t1 Bob enters first.
A
B
C
D
E
Units of demand / distance
10
10
10
10
Bob captures entire market
7
Spatial competition in a linear market
Time t2 Peter enters market.
A
B
C
D
E
Units of demand / distance
10
10
10
10
Bob already in market at position A. Where should
Peter locate?
8
Spatial competition in a linear market
Time t2 Peter enters market.
A
B
C
D
E
Units of demand / distance
10
10
10
10
Bob already in market at position A.
Where should Peter locate?
9
Spatial competition in a linear market
Time t3 Bob Retaliates and Moves
A
B
C
D
E
Units of demand / distance
10
10
10
10
Bob already in market at position A.
Peter in market at B
Bob relocates to C
10
Spatial competition in a linear market
Time t4 Peter Retaliates and Moves to C
A
B
C
D
E
Units of demand / distance
10
10
10
10
Peter in market at B
Bob in market at C
Peter retaliates and moves to C
11
Spatial competition in a linear market
A
B
C
D
E
Peter
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

12
Spatial competition in a linear market
A
B
C
D
E
Peter
Bob
  • Aggregate travel for consumers is reduced,
    improving welfare

13
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

14
Alfred Weber, 1909One 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

15
Alfred Weber, 1909 Material index
  • Material/market orientation
  • gt1
  • lt1
  • 1?

16
Alfred Weber, 1909One market, two localized RMs
  • Lets assume two localized RM sources,
  • S1 S2
  • Pure RMs, equal parts of FP weight

17
Alfred Weber, 1909One market, two localized
Gross RMs
  • Lets assume two localized Gross RM sources, S1
    S2
  • Gross RMs, 50 weight loss for each
  • S1, S2, or M
  • 4

18
Transport cost matrix industriallocation at
point M
Destination Origin S1 S2 M
S1 2
S2 2
M
Total Tptn Cost 4
19
Transport cost matrix industriallocation at
point S1
Destination Origin S1 S2 M
S1 0 1124
S2 2
M
Total Tptn Cost 4
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