Normative issues in the organization of modern retailers in Israel

Abstract

This paper raises questions regarding the desirable sizes of retail facilities within an existing urban system. We address questions of efficiency by reference to a social welfare function and by reference to profit maximization by developers. To this end we utilize a gravity-type simulation model and apply it in the case of Haifa, Israel based on a unique data base. Based on simulations of a single developer who owns all the retail facilities the optimal locations yield large retail facilities away from residential areas and smaller ones in the locations closer to the buying power. In the case that each facility is owned separately, stepwise optimization yields optimal order of development, first at locations in close proximity to the buying power. In the early stages of the development of a retail system the revenues are expected to be high and the sizes of retailers moderate. The total amount of retail space supplied by the modern retailers in reality is significantly higher than the amount suggested by the optimization tests.

Market Area Analysis for Retail and Service Locations with MCI

“…In many cases, no empirical market shares are available but only observed total sales of stores or locations, T j . Thus, many studies focus the model fitting by nonlinear optimization algorithms based on empirical total values (Baecker-Neuchl and Wagenseil, 2015;De Beule et al, 2014;Güssefeldt, 2002;Marinov and Czamanski, 2012;Orpana and Lampinen, 2003;Klein, 1988;Yingru and Lin, 2012). In the following, a new optimization algorithm of this type is introduced which is based on the idea of the local optimization of attraction approach by Güssefeldt (2002) (which is the only one with an explicit theoretical fundament) and features of other mentioned procedures.…”