August Losch’s Model

Introduction:

    In 1940, famous economists August Losch published book titled “Economics of Location” in which he established a general theory of location. Losch sought to draw attention to the marketing factor and the idea of maximum profits related to sales revenue. He claimed that it’s not a single economic pull that influences most settlements rather a complex combination of market, communication or administration. He attempted to explain the size and shape of the market areas within which a location would command the largest revenue. 

He based theory on set of assumptions like:

1. An isotropic surface. 
2. Constant supply of goods and services.
3. Population is evenly distributed.
4. Demand decreases with an increase in price. If the price increase is the result of an increase in the transport costs, demand would decrease with the distance from a production center, the demand curve would be cone shaped and the market area circular.
5. Entrepreneurs act as an economic man, their main aim being profit maximization.
6. He oversimplified the world to a flat uniform plain, held supply constant, and assumed that with increase in price the demand for a product decreased and if this price increase was because of an increase in transport costs, the demand would decrease with distance from the production center.

    Losch attempted to find a spatial structure that would be competent for both the producer and the consumer. To identify it, he chose one production center from the entire set of production points established on the planes. He then arranged the hexagons in such a fashion so that this one center was common for all. He then rotated the hexagons around the central point and brought them to the rest where the maximum number of hexagons coincided, forming points of maximum demand, which should ideally develop for concentration of industry. Thus, like Christaller’s hexagonal pattern, though smaller in size, twelve sectors developed. Of the twelve, six sectors emerged in which many settlements existed and numerous services were offered and other six sectors where settlements and services were scanty.

Losch Representation