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Competitive facility location and design with reactions of competitors already in the market

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  • Saidani, Nasreddine
  • Chu, Feng
  • Chen, Haoxun

Abstract

A new retail facility is to locate and its service quality is to determine where similar facilities of competitors offering the same goods are already present. The market share captured by each facility depends on its distance to customers and its quality, which is described by a probabilistic Huff-like model. In order to maximize the profit of the new facility, a two-stage method is developed, which takes into account the reactions of the competitors. In the quality decision stage, the competitive decision process occurring among facilities is modelled as a game, whose solution is given by its Nash equilibrium. The solution, which can be represented as functions of the location of the new facility, is obtained by analytical resolution of a system of equations in the case of one facility in the market or by polynomial approximation in the case of multiple facilities. In the location decision stage, an interval based global optimization method is used to determine the best location of the new facility. Numerical experiments on randomly generated instances demonstrate the effectiveness of the method.

Suggested Citation

  • Saidani, Nasreddine & Chu, Feng & Chen, Haoxun, 2012. "Competitive facility location and design with reactions of competitors already in the market," European Journal of Operational Research, Elsevier, vol. 219(1), pages 9-17.
    • Handle: RePEc:eee:ejores:v:219:y:2012:i:1:p:9-17
    DOI: 10.1016/j.ejor.2011.12.017
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    References listed on IDEAS

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    1. David L. Huff, 1966. "A Programmed Solution for Approximating an Optimum Retail Location," Land Economics, University of Wisconsin Press, vol. 42(3), pages 293-303.
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    Cited by:

    1. Jiannan, Cheng & feng, Lian & Zhongzhen, Yang, 2020. "Impacts of the choice habits of port users on the effects and efficiencies of port investment," Transport Policy, Elsevier, vol. 99(C), pages 203-214.
    2. Xiang Li & Tianyu Zhang & Liang Wang & Hongguang Ma & Xiande Zhao, 2022. "A minimax regret model for the leader–follower facility location problem," Annals of Operations Research, Springer, vol. 309(2), pages 861-882, February.
    3. Fernández, José & Hendrix, Eligius M.T., 2013. "Recent insights in Huff-like competitive facility location and design," European Journal of Operational Research, Elsevier, vol. 227(3), pages 581-584.
    4. Tammy Drezner & Zvi Drezner & Dawit Zerom, 2020. "Facility Dependent Distance Decay in Competitive Location," Networks and Spatial Economics, Springer, vol. 20(4), pages 915-934, December.
    5. Ekaterina Alekseeva & Yury Kochetov & Alexandr Plyasunov, 2015. "An exact method for the discrete $$(r|p)$$ ( r | p ) -centroid problem," Journal of Global Optimization, Springer, vol. 63(3), pages 445-460, November.
    6. Eiselt, H.A. & Marianov, Vladimir, 2020. "Maximizing political vote in multiple districts," Socio-Economic Planning Sciences, Elsevier, vol. 72(C).
    7. Boglárka G.-Tóth & Kristóf Kovács, 2016. "Solving a Huff-like Stackelberg location problem on networks," Journal of Global Optimization, Springer, vol. 64(2), pages 233-247, February.
    8. Tomoo Kikuchi & Shuige Liu, 2022. "The Power of Non-Superpowers," Papers 2209.10206, arXiv.org, revised Oct 2023.
    9. Derya Celik Turkoglu & Mujde Erol Genevois, 2020. "A comparative survey of service facility location problems," Annals of Operations Research, Springer, vol. 292(1), pages 399-468, September.
    10. Eligius M. T. Hendrix, 2016. "On competition in a Stackelberg location-design model with deterministic supplier choice," Annals of Operations Research, Springer, vol. 246(1), pages 19-30, November.
    11. Shamekhi Amiri, A. & Torabi, S. Ali & Ghodsi, R., 2018. "An iterative approach for a bi-level competitive supply chain network design problem under foresight competition and variable coverage," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 109(C), pages 99-114.

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