Imitation in location choice

a cause for spatial concentration suggests one plausible explanation for why neighbor-
hoods that should be capable of sustaining profitable retail activity—and would do so,
if firms conducted independent calculations of expected profit—sometimes wind up in
a state of abandonment, failing over a sustained period of time to attract mainstream
commercial activity.

It is unclear how far models of crime as a factor in residential location (Helsley
and Strange, 1999; Verdier, T., and Zenou, 2004; Helsley and Strange, 2005) ex-
tend to the case of retail location choice. Yet beliefs about crime appear to play
a large role in conditioning firms’ decisions about entering ghettos and other stig-
matized neighborhoods (Bray, 2007; Weissbourd, 1999). Interviews with business
decision makers responsible for location choice (Berg, 2007) confirm that many firms
cite crime as a reason for not considering stigmatized neighborhoods, although those
firms rarely, if ever, conduct or commission quantitative benefit-cost assessments to
justify such omissions from their consideration sets. Instead, the decision processes
of most firms’ location decisions appear to rely heavily on imitation heuristics and
threshold rules (i.e., satisficing) that quickly narrow down the consideration set to a
handful of candidates, in line with the ideas of Simon (1954, 1955), Cyert and March
(1963), and March (1988). Indeed, the biology literature shows imitation to be an
adaptive strategy for animals in a number of environments (Noble, Todd and Tuci,
2001; Hutchinson, 2005), just as the social science literature identifies environments
where imitation leads to success (Gigerenzer and Selten, 2002; Bosch-Domnech and
Vriend, 2003) Concerning the normative focus of this paper, it is useful to recall that
spatial agglomeration, or clustering, in the classic Hotelling (1929) model is wasteful,
as firms locate in the center to split the market rather than at locations minimizing
transportation costs. Hotelling, and later Boulding (1996), generalized the idea of
socially wasteful agglomerations to a broad range of social settings. This negative

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