Behavioral Approach to Location

Behavioral Approach to Location

Source: adapted from A. Pred (1967) Behavior and Location: Foundations for a Geographic and Dynamic Location Theory. Part I, Lund 1967; Part II, Lund 1969. [The Royal University of Lund, Department of Geography Studies in Geography Ser.B (Human Geography) Nos. 27 & 28 / C.W.K.Gleerup, Lund].

Although location decisions often appear to be based on a set of well defined criteria, the behavioral approach to location considers that decision makers (e.g. a corporation or a potential store owner) are not entirely rational. This potential inability to be fully rational is based on two assumptions. The first is the availability of locational information, since all the suitable information required to make an optimal decision may not be fully available or expensive and time consuming to acquire. The second is the ability to use the information on hand to make a locational decision, which considers factors such as skills, experience and even corporate governance. This is the reason why many locational recommendations are done by specialized consultants that are familiar with the regulatory and socioeconomic context of a region.

To consider the complexity of behavioral factors in locational decisions, Pred (1967) developed a representation based upon a behavioral matrix where one axis represented the available information and the other the capacity to use it. This construct takes into consideration that even if a lot of information may be available, this information may not be necessarily used properly or could even be analyzed incorrectly. Some decision makers are thus better than others. This representation assumes that most locational decision are not optimal, but acceptable, that is profitable. A profitable location is within a spatial margin of profitability, which is simply a set of locations (often conterminous) where the revenue derived from an activity are superior to the incurred costs of that location (rent, labor, etc.).

The above figure shows a behavioral matrix composed of a series of potential outcome in regard to a locational decision. The “Homo eoconomicus” (cell Cnn) is a perfectly informed individual having access to all the available information. The locational decisions of such an individual are optimal, implying the choice of a location has the highest profitability. Decision makers having good capacity to use and good availability of information (C35 and C54) would make a locational decision within the margins of profitability. Another decision maker (C22) could even be “lucky” because in spite of poor capacity to use and availability of information, the locational choice turns out to be profitable.

Even if Pred’s behavioral matrix is almost impossible to apply to the real world, it underlines the possibility of sub-optimal locational decisions, which is is reflective of a complex reality. Uncertainty is implicitly assumed because the decision maker is not certain that a locational choice would be profitable (within the spatial margins of profitability) until the choice has been made and figures about revenue and expenses become available. Even if all the necessary information was at hand, it is not guaranteed that the chosen location will be profitable.