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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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Distance
Q



D
e
m
a
n
d
e
d
Demand
Distance
FLIP
D
i
s
t
a
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c
e
Q Demanded
Demand
R
e
a
l

P
r
i
c
e

p
e
r

U
n
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t
Market
Threshold
Range
Threshold
Range
Market location
Spatial Demand Cone
RANGE:
The spatial extent of
demand before
demand drops to zero
Increasing
real price
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Distance
Q



D
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m
a
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d
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d
Demand
Distance
FLIP
D
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t
a
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c
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Q Demanded
Demand
R
e
a
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P
r
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c
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p
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r

U
n
i
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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 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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?
Unmet demand for
same good or
service
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R
T
M
How can problem of interstitial areas of unmet
demand be solved?

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

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R
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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
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R
T
M
A 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 !
Christallers Follies
Or: Why doesnt this always work?
There are, however, some near perfect examples of Christallers 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 dont always choose the central place!
- Purchasing power/needs not all the same
- Governments have control over location of industry/towns
- Perfect competition = unreal
- Places dont stay the same forever
- Does not fit industrial areas
There are, however, some near perfect examples of Christallers 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