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Optimal Business Location Model


The idea behind this paper is to create a model that will predict the optimal place for a business to locate. In order to ensure long run viability, a firm must understand the idea of optimal business location. In the designing of a strategy, it is important to not only evaluate the present market environment but to also account for possible future change. This paper will demonstrate the core ideas behind a comprehensive location model that will predict the optimal location for a business. The effectiveness of the model will be evaluated by using past data in Durham, North Carolina to predict current retail development and to see if the trend recognized would be able to correctly identify the location choices of firms. Further analysis will show what this foretells for Durham’s future retail locations.

The remainder of the paper can be found here.

A presentation on this topic can also be found here.

Bibliography:

1. Chi S.C., Kao S.S., Kuo R.J., “A decision support system for selecting convenience store location through integration of fuzzy AHP and artificial neural network.” Elsevier Science B.V., June 15, 2001.

2. Craig Samuel, Ghosh Avijit. “Formulating Retail Location Strategy in a Changing Environment.” The Journal of Marketing, Vol. 47, No. 3, 1983. pp 56-68.

3. Glaeser, Edward L., Rosenthal, Stuart S., Strange, William C., “Urban Economics and Entrepreneurship.” National Bureau of Economic Research. Working Paper 15536.

4. Huff, David L., “A Programmed Solution for Approximating an Optimum Retail Location.” Land Economics Vol. 42 No. 3, Aug. 1966. pp 293-303.

Economics of the Imperfect Information Insurance Market

One aspects of economics I am rather fond of is the insurance market. This is partly because it is one of the few economic models that can be easily adapted to include real-world elements that many models cannot address. In this paper I use the insurance market to show that many of the assumed equilibrium in economics models are actually infeasible when additional constrains, like imperfect information, are considered.

Introduction:
Traditionally, economic theorists have proposed models that disregard any information bias with the purpose of simplifying a situation. This paper analyzes competitive markets in context of the exchange of commodities where at least one of the parties does not have full or equal knowledge. When the concept of imperfect information is applied to various economics models, many of their market equilibriums cease to exist. In context of the insurance market, an equilibrium that disregards information bias often does not exist or would lead to the bankruptcy of a given firm. Although when imperfect information is considered, it is found that there are three equilibria that each rely on a price and quantity, rather than a price alone. Further calculations show that if individuals were willing and able to reveal their information, everyone could be made better off. In absence of high-risk consumers, both the low-risk individuals and firm would benefit, thus identifying high-risk individuals as inducers of one-sided externalities on the system. This parasitic relationship caused by the imperfect information is directly responsible for the pitfall of many economic theories.

If you would like to keep reading, feel free to download the document HERE.

Sources:
1. “Monopoly, Non-linear Pricing and Imperfect Information: The Insurance Market” by Stiglitz J. E.
2. “Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information” by Rothschild M., Stiglitz J.

By Mitchel Gorecki

The Perfect Storm

While scouring databases for manuscripts to review for our survey assignment, I stumbled upon an amazing find. In 1988, Greg Mankiw wrote a manuscript titled The Baby Boom, The Baby Bust, And The Housing Market. In it, he successful predicts the economic crisis of today using data from housing prices and birth rates. He later went on to become one of the most prominent economists of our time. A quick summary of his accomplishments can be found HERE, along with links to his most prominent works. If you care to keep up with his current activities, his blog can be read HERE.
Greg Mankiw
(Greg Mankiw)

The remainder of this blog covers the the literature survey that incorporates Mankiwi’s work in with two others.
Introduction:
The advancement of knowledge is a double-edged blade that has been able to both provide society with immense benefits, while at the same time slice out the general foundation of thought from which these benefits were spawn. Many times the truth is lost or forgotten for a greater assumption just because it is accepted throughout a community. Time and time again, popular mediocracy distorts our perception, controlling the ideas that become the ‘truth’. The purpose of this survey is to use three works written in 1988, 2002 and 2008 to analyze how, in context of the housing market, the social and economic pitfalls of each era led to the major crash in 2007. The ultimate goal is to provide a probable cause as to why no one was able to identify or correct the financial crisis before it occurred. The results of this survey show that rather than a single cause, the depression was the result of a trifecta of social and economic issues that each contributed to create the perfect storm that would catch society with its pants down.

Click HERE to keep reading.

The three sources used in this survey were:
1. The Baby Boom, The Baby Bust, And The Housing Market by Gregory Mankiw
2. An Analysis of North Carolina Lending Laws by Gregory Elliehausen and Michael E. Staten
3. Subprime Lending and the Housing Bubble by Major Coleman IV, Michael LaCour-Little and Kerry D. Vandell

— by Mitchel Gorecki —