A Computational Method for Market Area Analysis on a Network

Abstract

This paper shows a computational method for market area analysis assuming that stores and consumers are distributed over a network and the distance between two points on the network is given by the route distance. First, we consider five basic questions often raised in market area analysis, and show a general method, called the network transformation method, that gives an intuitive way of looking at computational methods for solving these questions. Second, assuming that consumers follow the Huff model, we consider four questions concerning market area delineation and market potential often discussed in market area analysis in practice. We show that the network transformation method is also useful to develop computational methods for solving these questions. One of the notable results is that market area delineation of the Huff model (which is analytically difficult to obtain on a plane) can be exactly obtained on a network.