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Lecture 8

GGR252 Lecture 8

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University of Toronto St. George
Stephen Swales

March 4, 2014 GGR252 Lecture 8 - Huff model o This may be a better method, but it is difficult to visualize once you get multiple centres o Concept ƒ The Huff model casts Reilly's law of retail gravitation in a probabilistic framework o Formula ݑ ܲ௜௝ ൌ ௜௝ σ ݑ௜௝ ݏ௝ ௕ ݀ ௜௝ ݑݐ݈݅ݐݕ▯݋݂▯ݏ݄݋݌݌݅݊݃▯ܿ݁݊ݐݎ݁ ܲ௜௝ ݏ௝ ൌ ݐ݋ݐ݈ܽ▯ݑݐ݈݅݅ݐݕ σ ௝݀௕ ௜௝ ƒ Huff postulated that the probability that a consumer at point "i" will travel to shopping centre "j", P_ij, is a ratio of the utility of the shopping centre to the consumer (u_ij) and the total utility of all shopping centres (∑ u_ij) that may be considered by the consumer. ƒ Components of utility are: x Size of the centre (e.g., gravity; attraction of the centre to the consumer) x Distance to the centre (e.g., proximity of the centre to the consumer) ƒ P_ij is the proportion of sales from neighbourhood "i" that goes to a particular shopping centre "j" in the context of all competing facilities. ƒ Exponent b x The value affects the distance variable x If the value is large, then higher friction of distance (e.g., convenience store) x If the value is small, then less friction of distance x The value is determined by experience x Over time, exponent b can change if the market becomes more or less mobile x Assume b = 1 o Data ƒ To apply the model, we need: x A measure of size (e.g., number of stores, number of employees, etc.) x A measure of accessibility (e.g., distance or travel time) x Data on market (e.g., CT’s, FSA’s, HH’s, POP. $$, HH expenditure) o For each census tract, how much money is likely to be available to be spent at the shopping centre? o Every store has a probability of capturing some of the income from all census tracts or zones o Refer to Appendix B for household expenditure data ƒ To calculate the potential expenditure x Estimate of friction of distance for retail type (e.g., exponent b) o Applications ƒ Assess theoretically the existing market size (POP. HH’S, $$) for each centre by calculating the population of each market area that will shop at each centre. x What is now in theory? ƒ Address a number of “what if” questions (e.g., strategy, forecasting) x What could change? x How will the market share change with the introduction of a new centre? Removal of a centre? Change in size of an existing centre? x What if the spatial distribution of the market changes ($$, ↑, ↓)? x What if the mobility of the market changes (exponent b)? o Assumptions and criticisms ƒ Unlike the Thiessen and converse, Huff is not a spatial monopoly method but utility is still only measured by relative proximity and size, other assumptions are much the same. Theoretical versus actual normative. o Behavioural models ƒ Where does the market actually come from? x This is the actual composition of the market x Cannot be
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