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Competitive location modeling with a rank proportional allocation

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  • Gunhak Lee
  • Morton E O’Kelly

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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  • Gunhak Lee & Morton E O’Kelly, 2011. "Competitive location modeling with a rank proportional allocation," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 38(3), pages 411-428, May.
  • Handle: RePEc:pio:envirb:v:38:y:2011:i:3:p:411-428
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