Hierarchy and Location

Problem:
We observe cities that are characterized by different sizes and different economic functions.
3 theories take into consideration sizes and economic functions:
1. Christaller's geographical approach to urban hierarchy
2. Losch´s economic theory
3. S
Theories that explain agglomeration and location try to answer the question  Why the city?
(Existence of the city)
Theories that explain accessibility and location try to answer the question  Where in the city?
(Organization)
Generalized accessibility theories  Way of functioning of different parts of the city, how in the
city?

Agglomeration economies do not explain the fact that we observe different sizes of cities. Cities
that have different sizes coexist.
Different sizes of cities correspond to different economic functions. We observe a repulsion effect
among big cities. The distance among cities is usually proportional to their size.

Principles that regulate hierarchy and location:

- Hierarchy of centers
- Size and frequency of centers of each hierarchical level and their market areas
- Average distance between same of different hierarchical levels  Geographical distribution
of centers.
 Central Place Theory: Christaller´s and Losch´s
Economic activities might be in alternative urban centers. When they took into consideration
several cities, they found an equilibrium of cities of the same size. We have not met theories able to
explain the location choices of several firms and households among alternative urban centers.
Christaller´s Central Place Theory - geographical approach
Theory developed in 1933.
- Assumption: An urban center exists where there are goods and services to be traded. The
central place must provide goods and services to a population spatially dispersed across a
uniform and isotropic surrounding territory.
- Aim of the model: Show how products and services are territorially organized into an urban
hierarchy.
Fundamental concepts to define the hierarchy of goods and services:
1. Range: Maximum distance that consumers are willing to travel to buy the service or
product. It includes the maximum transportation costs that consumers are willing to pay
(opportunity costs). It represents the actual demand for the service or good.
2. Threshold: Minimum distance to get enough consumers to produce the goods profitably.
The revenues minus the costs to produce that good should be greater than zero. It is the
desire to demand – Minimum distance advantageous for the supplier.
These concepts express in geographical terms the economic forces that organize activities in space
 Transportation and agglomeration costs.
When is a product/ service produced? Only if the actual demand is greater than the threshold.
Because there is sufficient demand for the supplier to make a profit. RANGE > THRESHOLD.
In this model, there must not be overlaps of market areas or empty areas. This cannot be reached
with circular market areas; therefore, the market areas are hexagons.
 Assumptions:
o Minimization of transportation costs for consumers
o Even distribution of the service supply (no empty areas)
o Competition among producers (no overlap)

 Equilibrium: a honeycomb lattice consisting of n centers producing for n hexagonal

markets.
Each good/service has a range that determines the size of its market area (bakery vs jewelry store).
Example:
n  Financial services (highest range)
n – 1  Jewelry store
n – 2  Bakery (lowest range)

High and low production costs of services are reflected in high or low-order locations.
- High-quality services = greater range and larger market area
Lower-order production units are located where the production of higher-order services already
exists (center of the hexagons) to enjoy agglomeration economies. They have a smaller market area.
The offer of a superior good automatically implies the presence of a lower-order good in the same
location.
 High quality

Center

Lower quality

Market principles
A part of the territory is left uncover (blue stripe between the border of green and border of blue)
A new center of the lower quality is created in the vertex where the higher service hexagon is.

For each higher order center there are 1+6/3=3 lower order centers.

Transportation principle
Which applies to a location equidistant from a pair of higher-order centres.
This choice optimizes the location of lower-order centres on the basis of minimization of transport
costs to the higher-order centres.
In each higher-order market area there are 1 + 6/2 = 4 lower-order centres

Administrative principle
Identified by location in the centre of the triangles making up the hexagon, so that the purpose of
optimization is to prevent higher-order centres from competing to administer lower-order ones.
This aim is achieved if the lower-order centres pertain to a single higher-order centre.

In this pattern, there are 1 + 6 = 7 lower-order centres for each market area of a certain order.

The model thus generates a hierarchy of urban centers: for each center (or market area) of order n
there are k centers of order n-1.
k is the factor of proportionality between the center of a certain order and the one immediately
below it and assumes values 3, 4, or 7 according to the predominant location principle (market,
transportation, or administrative).
In Christaller’s model, this proportionality factor is constant throughout the urban hierarchy. For
each k, simple rules can be applied to obtain the number of each order, the distance of centers
between the centers of each order, and the size of the market area.
Important conclusion: each large center produces the goods/services relative to its hierarchical level
and all lower-order goods/services.
The size of the city becomes a proxy for the urban functions, and each higher-order center has a
descending array of lower-order centers until the lowest level of agglomeration is reached.

Losch Central Place Theory – economic approach

The main aspect is that he hypothesized the theory of specialization. Different from the last theory
that all the cities provided all the services according to their size. Here, the concept of hierarchy
becomes more complex, and specialization is possible. Different specialization of centers of the
same size (impossible in Christaller).
Each center can host only the function at its hierarchical level. If you are a high-order center, you
can also just specialize in that specific service without the need to produce all the other lower-order
services.
He introduces the hypothesis that K can be different than 3, 4, and 7. It can also be 9, 12, 13, 16, 19,
21…) He overcomes the city of the constant factor of proportionality.
The market area is still Hexagonal.
Assumptions:
- Competition among firms  No uncovered market areas.
- Consumer rationality  Consumers choose the closest and the lowest price good/service.
His model defines market areas by explicit cost and demand curve of goods.
The model identifies stable spatial equilibrium and firms no longer have incentives to enter the
market.
The final structure of the territory is obtained by rotating the superposed hexagons to obtain the
maximum density of centers in some areas, and the maximum coincidence of different production
locations. The result is a series of circular alternate sectors of high and low settlement densities.
These sectors radiate out from a larger city to form a structure that complies with an efficiency
principle for the transport system.

Strengths
These theories just focus on agglomeration economies and transportation costs, heterogeneous
spaces field and they detected an urban hierarchically ordered landscape. They analyze the
existence of different cities of different sizes and roles and the distance between them.
- Christaller´s model  Suitable for describing structures of centers focused on production of
services.
- Losch´s model  Suitable for describing an urban landscape in which the industrial sector
also plays an important role.
Weaknesses
Lack of analysis of the demand. It is assumed to be homogeneous in space and immobile.  There
is a logical conflict with the model's result because, in the end, the population concentrates on the
urban centers.
The cost function of the suppliers is independent of location. The suppliers can decide to locate
anywhere in space with no variability in price and productive factors.
There is no interdependence between the suppliers. This is a severe weakness of the model.  They
fail to recognize that there is no interdependence of the suppliers, and the model excludes
complementary or substitutes of products or services.
Static nature of the models. They do not describe the evolution of the city over time.

City Networks Theory

An aspect of interdependence that was ignored by the past 2 theories is now taken into
consideration in this theory.
Medium-sized cities have undergone a development in the past years,
It is not true that cities of the same size do not interact.

For the exam NOT included: sections 3.2.2, 3.3.2, 3.5