Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 90: An Empirical Test of the Gravity p-Median Model

Kenneth Carling , Mengjie Han , Johan HÃ¥kansson () and Pascal Rebreyend
Additional contact information
Kenneth Carling: Dalarna university, Postal: School of Technology and Business Studies, SE-791 88 Falun, Sweden
Mengjie Han: Dalarna university, Postal: School of Technology and Business Studies, SE-791 88 Falun, Sweden
Johan HÃ¥kansson: Dalarna university, Postal: School of Technology and Business Studies, SE-791 88 Falun, Sweden
Pascal Rebreyend: The Swedish Research Institute of Trade (HUI), Postal: School of Technology and Business Studies, Dalarna university, SE-791 88 Falun, Sweden

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

JEL-codes: L81; Q51; R11

20 pages, April 24, 2013

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