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Data-Guided Gravity Model for Competitive Facility Location

Author

Listed:
  • Dawit Zerom

    (California State University-Fullerton)

  • Zvi Drezner

    (California State University-Fullerton)

Abstract

In this paper we introduce a data analytics approach for specifying the gravity model as applied to competitive facility location. The gravity model is used primarily by marketers to estimate the market share attracted by competing retail facilities. Once the market share is computed, various solution techniques can be applied for finding the best locations for one or more new facilities. In competitive facility location research, various parametrized gravity models have been proposed such as the power and the exponential distance decay specifications. However, parameterized approaches may not be robust to slight data inconsistency and possibly leading to inaccurate market share predictions. As the volume of data available to support managerial decision making is growing rapidly, non-parametric (data-guided) approaches are naturally attractive alternatives as they can mitigate parametric biases. We introduce a unified gravity model that encompasses practically all existing parametric gravity models as special cases. We provide a statistical framework for empirically estimating the proposed gravity models focusing on shopping malls data involving shopping frequency.

Suggested Citation

  • Dawit Zerom & Zvi Drezner, 2025. "Data-Guided Gravity Model for Competitive Facility Location," Networks and Spatial Economics, Springer, vol. 25(2), pages 387-405, June.
    • Handle: RePEc:kap:netspa:v:25:y:2025:i:2:d:10.1007_s11067-024-09623-5
    DOI: 10.1007/s11067-024-09623-5
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    References listed on IDEAS

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    1. Tammy Drezner & Morton O’Kelly & Zvi Drezner, 2023. "Multipurpose shopping trips and location," Annals of Operations Research, Springer, vol. 321(1), pages 191-208, February.
    2. Drezner, Zvi & Eiselt, H.A., 2024. "Competitive location models: A review," European Journal of Operational Research, Elsevier, vol. 316(1), pages 5-18.
    3. Tammy Drezner & Zvi Drezner, 2004. "Finding the optimal solution to the Huff based competitive location model," Computational Management Science, Springer, vol. 1(2), pages 193-208, July.
    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. Aboolian, Robert & Berman, Oded & Krass, Dmitry, 2007. "Competitive facility location and design problem," European Journal of Operational Research, Elsevier, vol. 182(1), pages 40-62, October.
    6. Tammy Drezner & Zvi Drezner & Dawit Zerom, 2022. "An extension of the gravity model," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 73(12), pages 2732-2740, December.
    7. T Drezner & Z Drezner, 2008. "Lost demand in a competitive environment," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(3), pages 362-371, March.
    8. 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.
    9. Aboolian, Robert & Berman, Oded & Krass, Dmitry, 2007. "Competitive facility location model with concave demand," European Journal of Operational Research, Elsevier, vol. 181(2), pages 598-619, September.
    10. T Drezner & Z Drezner, 2012. "Modelling lost demand in competitive facility location," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 63(2), pages 201-206, February.
    Full references (including those not matched with items on IDEAS)

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