Abstract
The standard model of the equilibrium spatial market area and price for a single shopping good is extended to the case where the consumer devotes some income to a nonshopping (outside) good or to obtaining leisure. The presence of an outside good, which does not incur transport or inventory costs, is shown to affect the market area and price of the shopping good according to the relative preference between the goods. The price of the outside good has no effect on the market area and equilibrium price of the shopping good when the utility function is of a simple Bergson type. The generalization to a model where leisure is a source of utility, and where shopping time and working time reduce the amount of leisure, yields richer results. In particular, not only do relative preferences affect the price and market area for the shopping good, but also the wage rate affects demands and prices. Variations in the time required to travel to the shop and the time needed to do the shopping are shown to have opposite effects on the equilibrium market area and prices. Numerical calculations of elasticities of market areas and prices show that variations in all time-related parameters have an important impact and hence should not be ignored in modelling the factors which determine the size of a spatial market.
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