Size of Markets Versus Transport Costs in Industrial Location Surveys and Theory

THE distinction between the 'size of market' factor on the one hand and the 'transport cost' factor on the other is a very fine one, and only recently has the former been taken into account in location theory.2 At the beginning, it was given consideration only in the theory of spatial competition, and then as part of the broad subject of monopolistic competition. In turn, location theory proper followed the purely cost approach originated by von Thuinen3 and given rigorous formulation by Weber.4 Significantly, however, there is reference to what is called market orientation in all the leading treatises on the subject, both old5 and new,, a reference which traditionally made the one part of the other. Empirical studies by planning and research groups did, it is true, request respondents to evaluate the market and transport cost factor as if they were fully separable. But the terms were never defined and the individual respondents ascribed their own meanings to them. Illustrative of the resulting confusion was the tradition of designating that location which took place 'near to the consumer' as a location which deferred to the market factor, and this was accepted regardless of whether the motivation was a sales advantage due to proximity, the desire to control a special market, or a saving of transport costs. Indeed, the last usage became so common in traditional descriptions that the most prevalent explanation for market-oriented location was that it resulted in transport savings and this usually was said to take place when the raw materials gained weight as a result of fabrication.