The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Central Place Theory

  • Marcus Berliant
Reference work entry


Central place theory is a descriptive theory of market area in a spatial context. Its main assumptions are that consumer population is distributed uniformly while firms locate in cities; the latter form a hierarchy with overlapping market areas. But central place theory runs afoul of Starrett’s spatial impossibility theorem. Not grounded in the analytical tools of modern economics, central place theory does not have firm foundations. Thus, it is difficult to build on central place theory, either theoretically or empirically.


Central place theory City hierarchy Increasing returns to scale Krugman, P. Spatial impossibility theorem Urban agglomeration 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Marcus Berliant
    • 1
  1. 1.