Reilly's law of retail gravitation

In economics, Reilly's law of retail gravitation is a heuristic developed by William J. Reilly in 1931.[1] According to Reilly's "law," customers are willing to travel longer distances to larger retail centers given the higher attraction they present to customers. In Reilly's formulation, the attractiveness of the retail center becomes the analogy for size (mass) in the physical law of gravity.

The law presumes the geography of the area is flat without any rivers, roads or mountains to alter a consumer's decision of where to travel to buy goods. It also assumes consumers are otherwise indifferent between the actual cities. In analogy with Newton's law of gravitation, the point of indifference is the point at which the "attractiveness" of the two retail centres (postulated to be proportional to their size and inversely proportional to the square of the distance to them) is equal:

\frac{d_A}{d_B} = \sqrt{\frac{P_A}{P_B}}

Where d_A is the distance of the point of indifference from A, d_B is its distance from B, and P_A/P_B is the relative size of the two centres. If the customer is on the line connecting A and B, then if D is the distance between the centres, the point of indifference as measured from A on the line is

d= \frac{D}{1+\sqrt{P_B/P_A}}

As expected, for centres of the same size, d=D/2, and if A is larger than B, the point of indifference is closer to B. As the size of A becomes very large with respect to B, d tends to D, meaning the customer will always prefer the larger centre unless they're very close to the smaller one.

Antecedents

In addition to Newton's Law of Gravity in the physical sciences, there were other antecedents to Reilly's "law" of retail gravity. In particular, E.C. Young in 1924 described a formula for migration that was based on the physical law of gravity, and H.C. Carey had included a description of the tendency of humans to "gravitate" together in a 1858 summary of social science theory.[2]

Applications and Later Works

Reilly's law has many variations, and extensions and applications are numerous. Among these include:

These formulas have been observed to be so close in logic to Reilly's "law" that, under suitable assumptions, they can be shown to be transformations of versions of Reilly's formula.[5][6]

See also

References

  1. ↑ Reilly WJ (1931) The law of retail gravitation. New York: Knickerbocker Press
  2. ↑ Anderson, Patrick L., Business Economics & Finance, CRC Press, 2004; chapter 13.
  3. ↑ Huff, David L. (1964). “Defining and Estimating a Trade Area.” Journal of Marketing, Volume 28, 34-38.
  4. ↑ Converse, P.D. (1949). “New Laws of Retail Gravitation.” Journal of Marketing, Volume 14, January, 379-384
  5. ↑ Anderson, Volcker, Phillips, "Converse's Breaking-Point Model Revised," manuscript found at: http://www.aabri.com/manuscripts/09219.pdf
  6. ↑ Anderson, Patrick L., Business Economics & Finance, CRC Press, 2004; chapter 13.

External links

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