The Logistics-Costs Model
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The traditional theoretical focus of industrial location and linkage analysis is on the question of how transactions across space affect and influence market behaviour between points in space. Although such transactions take place in both space and time, time is rarely incorporated into space and location models, and where it is, this is usually done in one of two indirect ways. The first way is by assuming labour markets are efficient, in terms of the dual decision hypothesis (Clower 1965). From this perspective we can add the marginal utility of leisure time per mile of travel (i.e. the hourly wage rate divided by the number of miles travelled per hour) as a mark-up on the per-mile transportation costs. This approach is familiar in the literature of urban economics (Fujita 1989 ch.2). The second way, which is adopted by the location-production models of the firm in space following the Weber-Moses tradition, is by implicitly replacing historical time with logical time. Within this characterisation of time it is possible to move in either direction, as in space, thereby allowing us to discuss the comparative statics of alternate states, as determined by the currently prevailing parameters (Morroni 1992 pp.32–37).
KeywordsTransport Cost Output Price Economic Order Quantity Logistics Cost Space Cost
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