Abstract
ABSTRACT This paper develops a model to examine how the size of urban public establishments is affected by changes in transportation and production technology and customer behaviour. The size and market area are determined by minimizing the sum of average travel cost and average production cost, subject to demand‐supply and revenue‐cost equalities. The results show that improved transportation technology and reduced transportation cost have the effect of enlarging the size and market area, and the extent of this depends on the customers sensitivity to travel time. The effects of raised factor prices in production depend on the elasticity of the customer's demand with respect to the produced price.
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