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Competitive location modeling with a rank proportional allocation

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  • Gunhak Lee
  • Morton E O’Kelly
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    Abstract

    Competitive location modeling deals with a strategic spatial decision which seeks to identify optimal locations for new facilities among existing competing facilities. The capture of customers by a new facility essentially depends on customer-choice behaviors. In this paper, we introduce a competitive location model incorporating a rank proportional choice rule. Also, we explore how the competitive location model with a ranking system differs from other models with two more-typical choice rules—deterministic and probabilistic choices. To do so, we present a numerical example and an illustrative application in the broadband market context, focusing on customer-capture patterns. Our analytical findings reveal that the different choice rules in modeling significantly influence customer-capture and market-share estimates. In particular, a competitive location model with a rank proportional allocation captures fewer customers than other models with different allocation rules, given a fixed number of few facilities.

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    Bibliographic Info

    Article provided by Pion Ltd, London in its journal Environment and Planning B: Planning and Design.

    Volume (Year): 38 (2011)
    Issue (Month): 3 (May)
    Pages: 411-428

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    Handle: RePEc:pio:envirb:v:38:y:2011:i:3:p:411-428

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    Web page: http://www.pion.co.uk

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