Scandinavian Working Papers in Economics
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No 90:
An Empirical Test of the Gravity p-Median Model

Kenneth Carling, Mengjie Han, Johan Håkansson () and Pascal Rebreyend

Abstract: A customer is presumed to gravitate to a facility by the distance to it and the attractiveness of it. However regarding the location of the facility, the presumption is that the customer opts for the shortest route to the nearest facility. This paradox was recently solved by the introduction of the gravity p-median model. The model is yet to be implemented and tested empirically. We implemented the model in an empirical problem of locating locksmiths, vehicle inspections, and retail stores of vehicle spare-parts, and we compared the solutions with those of the p-median model. We found the gravity p-median model to be of limited use for the problem of locating facilities as it either gives solutions similar to the p-median model, or it gives unstable solutions due to a non-concave objective function.

Keywords: distance decay; market share; network; retail; simulated annealing; travel time; (follow links to similar papers)

JEL-Codes: L81; Q51; R11; (follow links to similar papers)

20 pages, April 24, 2013

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