Half market each no price war average distance may

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Unformatted text preview: no price war – ↓ average distance – may exist other complications (one is closer to beach) 2.9 Bounding of Spatial Market Type of Boundaries 1. 2. 3. 4. institutiaonal/political range/distance decay: beyond which the market will go somewhere else competitive natural: Example: Don Valley Example: Toronto’s most important boundary is the competitive one. (Analyze why!) 2.10 Unifying/Simplifying Assumptions (Role of Models) Models an idealized representation of the real world in order to demonstrate some of its properties c D. Wang & C.Zhao, 2006 5 3 TRADE AREA DELIMITATION TECHNIQUES • All models have unifying or simplifying assumptions that attempt to isolate the key factors thought to be relevant to the analysis and remove the many complexities of the real world thought not to be relevant in the application of the model. • unrealistic assumptions can be the source of weaknesses in models. 3 Trade Area Delimitation Techniques 3.1 Normative Approaches Asks the question of “what should be done given certain assumptions” Thiessen Polygon 1. Technique 2. Assumptions (a) Distance to the retail opportunity is the factor that determines where the customer will shop, due to disincentive nature to distance (b) Relative proximity is the ONLY variable that differentiates the stores (c) The stores are IDENTICAL in all aspects of supply: goods, prices, service, etc (d) Retail centers service spatial monopoly trade areas, i.e. markets do not overlap (e) All areas are serviced (f) Consumers are fully informed, fully rational, decision makers; consumers are economic operators; they know all the locations and all the distances to them (g) Uniform travel plain on an uninterrupted travel surface, i.e. it is equally easy to travel in any direction 3. Applications • theoretical amount of market for each store using Census Tract ; quite accurate compared to actual market • partial Census Tract – Centroid Method – Proportional Grid Method • to explore changes in the system such as good locations for new outlets • theoretically best sites for new outlets; at least on the lines of indifference; at best at the vertices of boundary lines; poorly serviced; least likely to “cannibalize” their neighbours • finding gaps in the map; opening new stores; closing stores...
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