Retail Activity Allocation Modeling with Endogenous Retail Prices and Shopping Travel Costs

Abstract

A model of retail activity allocation and shopping trip assignment, with endogenous zonal commodity prices and costs of travel, is developed, based on three main assumptions. First, the revenues from sales of retail goods in each zone are assumed to be in balance with the costs of supplying such goods. Second, shoppers in each zone of residence are distributed to shopping zones according to a logit function of a generalized cost of shopping and traveling. Third, shoppers choose a travel route to the store such that their cost of travel is minimized. The model solution thus represents an economic, market-clearing equilibrium and a transportation network equilibrium. The model is then applied to assess the impacts, on a hypothetical commercial activity and travel system, of various changes in physical and economic conditions, as well as the result of the imposition of constraints on zonal retail activity and/or prices. The results provide some insight into the sometimes counterintuitive interactions between the key variables and illustrate the potential use of the model for policy analysis purposes. Possible areas for further refinements of the model are discussed in conclusion.