The Size and Shape of the Market Area of a Firm

Abstract

triangles which once played so prominent a part in theory, therefore, have given way to broader models which attempt to determine the spatial features of a firm's market. These recent models have presented conceptions of the firm's market area ranging from the hexagon to a perfect or incomplete circle. The studies, which attempt explanation of the size and shape of the firm's market area, are closely related to others that stress the locational interdependence of firms. In analytical frameworks, these schools are, however, sharply distinguishable. The market area approach assumes fixed locations, and is, thereby, essentially an analysis of short-run phenomena. At best, it appears capable of yielding knowledge of some particular long-run equilibria in space, notwithstanding an attempt to derive a general equilibrium theory within its framework. On the other hand, the locational interdependence school hypothesizes either movable locations (without cost), or planned future locations; its framework is, inherently, designed for long-run analysis; its conclusions must be considered by those who hope to deduce a general equilibrium theory, within a market area framework. This article confines its interest largely to the market area type of analysis. It presents, in section II, a quasi-historical treatment of the more important contributions to market area analysis. This method of procedure offers a natural way of discussing changing directions of thought as well as problems and points of study that have been largely neglected. In section III, the locational inter-