Central Place Theory2

8/12/2019 Central Place Theory2

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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 thatfalls under the economic, social, political influence(hinterland).

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

- HIGH/LOW ORDER SETTLEMENTS, low ordersettlements provide simple, basic services (grocerystores, etc) high order settlements have specializedservices (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 peoplewill travel to market to buy it)



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Distance

Q

D e m a n d e d

Demand

Distance

Market location

Spatial Demand Cone

RANGE:The spatial extent ofdemand before

demand drops to zero

Increasingreal price



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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 stayin business (normal profits)

?Unmet demand forsame good or

service



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Implication of RANGE:

• room for more than one producer ofsame 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 orservice

R

T

M

2R distance



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?

Unmet demand forsame good orservice



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How can problem of interstitial areas of unmet

demand be solved?



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R

T

MR

T

MR

T

M R

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R

T

M

R

T

MR

T

M

R

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T

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R

T

MR

T

M R

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MR

T

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R

R

T

M

Interstitial areas of unmet demand disappear if

markets are moved closer together

H ill k t b d i f i th



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R

T

MR

T

MR

T

M R

T

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R

T

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R

T

MR

T

M

R

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M R

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How will market area boundaries form given the

ellipses formed by overlapping market areas?

Overlapping TradeAreas•Unfilled demandnow served

•Competition



13 A system of hexagonal market areas fills the plain so that

every consumer is served and no market areas overlap

No OverlappingTrade Areas•Unfilleddemandnow served

•No competition•Every producermaking “normalprofit”

Homogeneous plain



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Further economic / spatial

complications:

• T and R are good- or service-specific

• Separate demand curves / cones foreach 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 CONCERNINGFUNCTIONS !



Christaller’s Follies Or: 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 acommercial 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 aboutspace and spatial dynamics

• The basis for retail and trade areastudies for planning urbancommercial functions and macro-

marketing

Central Place Theory2

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