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Surviving in a Competitive Spatial Market: The Threshold Capture Model

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Author Info
Daniel Serra ()
Charles Revelle
Ken Rosing
Abstract

Most facility location decision models ignore the fact that for a facility to survive it needs a minimum demand level to cover costs. In this paper we present a decision model for a firm that wishes to enter a spatial market where there are several competitors already located. This market is such that for each outlet there is a demand threshold level that has to be achieved in order to survive. The firm wishes to know where to locate its outlets so as to maximize its market share taking into account the threshold level. It may happen that due to this new entrance, some competitors will not be able to meet the threshold and therefore will disappear. A formulation is presented together with a heuristic solution method and computational experience.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 359.

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Date of creation: Feb 1999
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Handle: RePEc:upf:upfgen:359

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Discrete facility location; threshold; competitive location;

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Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
R53 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. J R Current & J E Storbeck, 1988. "Capacitated covering models," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 15(2), pages 153-163, March. [Downloadable!] (restricted)
  2. ReVelle, Charles, 1993. "Facility siting and integer-friendly programming," European Journal of Operational Research, Elsevier, vol. 65(2), pages 147-158, March. [Downloadable!] (restricted)
  3. Cornuejols, G. & Sridharan, R. & Thizy, J. M., 1991. "A comparison of heuristics and relaxations for the capacitated plant location problem," European Journal of Operational Research, Elsevier, vol. 50(3), pages 280-297, February. [Downloadable!] (restricted)
  4. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October. [Downloadable!] (restricted)
    Other versions:
  5. Rosing, K. E. & ReVelle, C. S., 1997. "Heuristic concentration: Two stage solution construction," European Journal of Operational Research, Elsevier, vol. 97(1), pages 75-86, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rosa Colomé & Helena Ramalhinho-Lourenço & Daniel Serra, 2003. "A New Chance-constrained Maximum Capture Location Problem," Economics Working Papers 661, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  2. Martin Carree & Marcus Dejardin, 2007. "‘Entry Thresholds and Actual Entry and Exit in Local Markets’," Small Business Economics, Springer, vol. 29(1), pages 203-212, June. [Downloadable!] (restricted)
    Other versions:
  3. Benjamin Spaulding & Robert Cromley, 2007. "Integrating the maximum capture problem into a GIS framework," Journal of Geographical Systems, Springer, vol. 9(3), pages 267-288, September. [Downloadable!] (restricted)
  4. Francisco Silva & Daniel Serra, 2008. "Incorporating waiting time in competitive location models: formulations and heuristics," Economics Working Papers 1091, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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