Finance:Huff model

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In spatial analysis, the Huff model is a widely used tool for predicting the probability of a consumer visiting a site, as a function of the distance of the site, its attractiveness, and the relative attractiveness of alternatives. It was formulated by David Huff in 1963.[1] It is used in marketing, economics, retail research and urban planning,[2] and is implemented in several commercially available GIS systems. Its relative ease of use and applicability to a wide range of problems contribute to its enduring appeal.[3]

The formula is given as:

[math]\displaystyle{ P_{ij}= \frac{A_j^\alpha D_{ij}^{- \beta}} {\sum_{k=1}^{n}A_k^{\alpha} D_{ik}^{- \beta}} }[/math]

where :

  • [math]\displaystyle{ A_j }[/math]is a measure of attractiveness of store j
  • [math]\displaystyle{ D_{ij} }[/math]is the distance from the consumer's location, i, to store j.
  • [math]\displaystyle{ \alpha }[/math] is an attractiveness parameter
  • [math]\displaystyle{ \beta }[/math] is a distance decay parameter
  • [math]\displaystyle{ n }[/math] is the total number of stores, including store j

References