Optimal Location of Retail Facilities: A Model with Practical Applications

Abstract

There is a substantial theoretical literature on the location of retail facilities in space assuming that the spatial demand curve is known, or that the ideal data needed to estimate such a curve is available. This study shows how to implement a formal location analysis for a retail activity (postal services) when all that is known is revenue of currently operating facilities. Further complications, such as the delivery of retail services through two different types of outlets are also accommodated by the method. In the end, it is possible to implement a formal business model for the delivery of retail postal services that allows the user to simulate the consequences of dramatic changes in the way that those services are supplied to the public.

Keywords: location theory, retail facilities, postal service, spatial demand

JEL Classification: L10, L22, R10, R30