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Central Place Theory (CPT)

Assumptions• ►Isotropic plain• ►Transportation costs are a linear function

of distance• ►Population is evenly distributed• ► Rational behaviour • ►Consumers have identical preferences• ►Market characterized by free entry

(i.e.perfectly competitive)

- CENTRAL PLACE: settlement that provides goods & services.

- SPHERE OF INFLUENCE: surrounding the CP, area that falls under the economic, social, political influence (hinterland).

- FUNCTIONAL HIERARCHIES: generalizations regarding spacing, size and function of settlements.

- HIGH/LOW ORDER SETTLEMENTS, low order settlements provide simple, basic services (grocery stores, etc) high order settlements have specialized services (universities, concert halls)

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Important definitions:

• Threshold:• minimum DEMAND (volume of sales) needed

for a business to stay in operation (and make a “normal” profit).

• Range:• maximum distance over which a good can be

sold from point P (i.e. where real price is low enough that people will travel to market to buy it)

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DistanceQ

D

em

ande

d

Demand

Distance

FLIP

Dis

tanc

e

Q Demanded

Demand

Rea

l Pric

e p

er U

nit

Market

Threshold

Range

Threshold

Range

Market location

Spatial Demand Cone

RANGE:The spatial extent of demand before demand drops to zero

Increasing real price

5Distance

Q

De

man

ded

Demand

Distance

FLIP

Dis

tanc

e

Q Demanded

Demand

Rea

l Pric

e p

er U

nit

Market

Threshold

Range

Threshold

Range

Demand = zero

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Implications of the RANGE

R

T

M

Isotropic surface

Area of Extra Profit Min area required to stay in business (normal profits)

?Unmet demand for

same good or service

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Implication of RANGE:

• room for more than one producer of same good / service• where would producer locate?• > 2*R• avoiding overlap

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Implications of the RANGE

R

T

M

Homogeneous plain

?Unmet demand for

same good or service

R

T

M

2R distance

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R

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?Unmet demand for

same good or service

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How can problem of interstitial areas of unmet demand be solved?

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Interstitial areas of unmet demand disappear if markets are moved closer together

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How will market area boundaries form given the ellipses formed by overlapping market areas?

Overlapping Trade Areas•Unfilled demand now served•Competition

13A system of hexagonal market areas fills the plain so that every consumer is served and no market areas overlap

No Overlapping Trade Areas•Unfilled demand now served•No competition•Every producer making “normal profit”

Homogeneous plain

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Further economic / spatial complications:

• T and R are good- or service-specific• Separate demand curves / cones for

each good or service• Why?

• Different levels of demand• Different sensitivity to distance etc.

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Distance

Q Demanded

Distance

Good / service A

Good / service B

Good / service C

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Distance

Q Demanded

Distance

Good / service A

Good / service B

Good / service C

Range A

Range B

Range C

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Distance

Q Demanded

Distance

Good / service A

Good / service B

Good / service C

Range A

Range B

Range C

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Orders of Goods / Services

• lower order goods • small T & R • (high frequency, low cost)

• higher order goods• large T & R • (low frequency,

high cost goods)

• i.e. different “geographies” for different goods / services

A GENERAL GRAPH CONCERNING FUNCTIONS !

Christaller’s FolliesOr: Why doesn’t this always work?

There are, however, some near perfect examples of Christaller’s theory to be found in the Canadian prairies and the Netherlands.

- Large areas of flat land rarely exist- Transport has changed since his day- People/wealth are not evenly distributed- Folks don’t always choose the central place!- Purchasing power/needs not all the same- Governments have control over location of industry/towns- Perfect competition = unreal- Places don’t stay the same forever- Does not fit industrial areas

There are, however, some near perfect examples of Christaller’s theory to be found in the Canadian prairies and the Netherlands.

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Central Place Theory: Recap

• Tertiary activities: the city as a commercial centre…

• …within a hierarchical system• Umlands• Simplifying assumptions• Spatial organization

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Central Place Theory

• A way of thinking about hierarchies• Urban centres• Urban functions• Market areas

• A starting point for theorizing about space and spatial dynamics

• The basis for retail and trade area studies for planning urban commercial functions and macro-marketing