Two-player simultaneous location game: Preferential rights and overbidding
Competitive location problems can be characterized by the fact that the decisions made by others will affect our own payoffs. In this paper, we address a discrete competitive location game in which two decision-makers have to decide simultaneously where to locate their services without knowing the decisions of one another. This problem arises in a franchising environment in which the decision-makers are the franchisees and the franchiser defines the potential sites for locating services and the rules of the game. At most one service can be located at each site, and one of the franchisees has preferential rights over the other. This means that if both franchisees are interested in opening the service in the same site, only the one that has preferential rights will open it. We consider that both franchisees have budget constraints, but the franchisee without preferential rights is allowed to show interest in more sites than the ones she can afford. We are interested in studying the influence of the existence of preferential rights and overbidding on the outcomes for both franchisees and franchiser. A model is presented and an algorithmic approach is developed for the calculation of Nash equilibria. Several computational experiments are defined and their results are analysed, showing that preferential rights give its holder a relative advantage over the other competitor. The possibility of overbidding seems to be advantageous for the franchiser, as well as the inclusion of some level of asymmetry between the two decision-makers.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 229 (2013)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/eor|
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.:
- Hakimi, S. Louis, 1983. "On locating new facilities in a competitive environment," European Journal of Operational Research, Elsevier, vol. 12(1), pages 29-35, January.
- Díaz-Báñez, J.M. & Heredia, M. & Pelegrín, B. & Pérez-Lantero, P. & Ventura, I., 2011. "Finding all pure strategy Nash equilibria in a planar location game," European Journal of Operational Research, Elsevier, vol. 214(1), pages 91-98, October.
- Subhasish Chowdhury & Dan Kovenock & Roman Sheremeta, 2013.
"An experimental investigation of Colonel Blotto games,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(3), pages 833-861, April.
- Chowdhury, Subhasish M. & Kovenock, Dan & Sheremeta, Roman M., 2009.
"An experimental investigation of Colonel Blotto games
[Eine experimentelle Untersuchung von „Colonel Blotto“-Spielen]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2009-08, Social Science Research Center Berlin (WZB).
- Subhasish M. Chowdhury & Dan Kovenock J. & Roman M. Sheremeta, 2009. "An Experimental Investigation of Colonel Blotto Games," CESifo Working Paper Series 2688, CESifo Group Munich.
- Chowdhury, Subhasish & Kovenock, Dan & Sheremeta, Roman, 2011. "An Experimental Investigation of Colonel Blotto Games," MPRA Paper 46810, University Library of Munich, Germany.
- Cary Deck & Roman M. Sheremeta, 2012. "Fight or Flight?," Journal of Conflict Resolution, Peace Science Society (International), vol. 56(6), pages 1069-1088, December.
- Deck, Cary & Sheremeta, Roman, 2012. "Fight or Flight?," MPRA Paper 52130, University Library of Munich, Germany.
- Osborne, Martin J., 2009. "Introduction to Game Theory: International Edition," OUP Catalogue, Oxford University Press, number 9780195322484, April.
- Plastria, Frank, 2001. "Static competitive facility location: An overview of optimisation approaches," European Journal of Operational Research, Elsevier, vol. 129(3), pages 461-470, March.
- Rhim, Hosun & Ho, Teck H. & Karmarkar, Uday S., 2003. "Competitive location, production, and market selection," European Journal of Operational Research, Elsevier, vol. 149(1), pages 211-228, August.
- Brian Roberson, 2006. "The Colonel Blotto game," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(1), pages 1-24, September.
- Dan Kovenock J. & Brian Roberson, 2010. "Conflicts with Multiple Battlefields," CESifo Working Paper Series 3165, CESifo Group Munich.
- Dan Kovenock & Brian Roberson, 2010. "Conflicts with Multiple Battlefields," Purdue University Economics Working Papers 1246, Purdue University, Department of Economics.
- Porter, Ryan & Nudelman, Eugene & Shoham, Yoav, 2008. "Simple search methods for finding a Nash equilibrium," Games and Economic Behavior, Elsevier, vol. 63(2), pages 642-662, July.
- Ayala Arad & Ariel Rubinstein, 2010. "Colonel Blotto’s Top Secret Files," Levine's Working Paper Archive 814577000000000432, David K. Levine.
- Godinho, Pedro & Dias, Joana, 2010. "A two-player competitive discrete location model with simultaneous decisions," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1419-1432, December.
- J. Barkley Rosser, 2009. "Introduction," Chapters,in: Handbook of Research on Complexity, chapter 1 Edward Elgar Publishing.
- Kress, Dominik & Pesch, Erwin, 2012. "Sequential competitive location on networks," European Journal of Operational Research, Elsevier, vol. 217(3), pages 483-499. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:229:y:2013:i:3:p:663-672. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.
- Chowdhury, Subhasish M. & Kovenock, Dan & Sheremeta, Roman M., 2009. "An experimental investigation of Colonel Blotto games