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Competitive location and pricing on networks

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Abstract

In this paper we consider a location and pricing model for a retail firm that wants to enter a spatial market where a competitor firm is already operating as a monopoly with several outlets. The entering firms seeks to determine the optimal uniform mill price and its servers' locations that maximizes profits given the reaction in price of the competitor firm to its entrance. A tabu search procedure is presented to solve the model together with computational experience.

Suggested Citation

  • Daniel Serra & Charles Revelle, 1997. "Competitive location and pricing on networks," Economics Working Papers 219, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:219
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    File URL: https://econ-papers.upf.edu/papers/219.pdf
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    References listed on IDEAS

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    1. Karkazis, John, 1989. "Facilities location in a competitive environment: A promethee based multiple criteria analysis," European Journal of Operational Research, Elsevier, vol. 42(3), pages 294-304, October.
    2. D Serra & S Ratick & C ReVelle, 1996. "The maximum capture problem with uncertainty," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 23(1), pages 49-59, January.
    3. Domschke, Wolfgang & Drexl, Andreas, 1985. "Location and layout planning – an international bibliography," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 36418, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    4. Pierre Hanjoul & Pierre Hansen & Dominique Peeters & Jacques-Francois Thisse, 1990. "Uncapacitated Plant Location Under Alternative Spatial Price Policies," Management Science, INFORMS, vol. 36(1), pages 41-57, January.
    5. Eiselt, H. A. & Laporte, G., 1989. "Competitive spatial models," European Journal of Operational Research, Elsevier, vol. 39(3), pages 231-242, April.
    6. Daniel Serra & Charles Revelle, 1993. "Market capture by two competitors: The pre-emptive location problem," Economics Working Papers 39, Department of Economics and Business, Universitat Pompeu Fabra.
    7. repec:cor:louvrp:-747 is not listed on IDEAS
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    Cited by:

    1. repec:spr:annopr:v:256:y:2017:i:1:d:10.1007_s10479-016-2288-z is not listed on IDEAS
    2. 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.
    3. ReVelle, C. S. & Eiselt, H. A., 2005. "Location analysis: A synthesis and survey," European Journal of Operational Research, Elsevier, vol. 165(1), pages 1-19, August.
    4. Dominik Kress & Erwin Pesch, 2016. "Competitive Location and Pricing on Networks with Random Utilities," Networks and Spatial Economics, Springer, vol. 16(3), pages 837-863, September.
    5. Fernandez, Pascual & Pelegrin, Blas & Garcia Perez, Maria Dolores & Peeters, Peter H., 2007. "A discrete long-term location-price problem under the assumption of discriminatory pricing: Formulations and parametric analysis," European Journal of Operational Research, Elsevier, vol. 179(3), pages 1050-1062, June.
    6. Hua, Guowei & Cheng, T.C.E. & Wang, Shouyang, 2011. "The maximum capture per unit cost location problem," International Journal of Production Economics, Elsevier, vol. 131(2), pages 568-574, June.
    7. Verónica Durán-Carbó & Charles ReVelle & Daniel Serra, 2006. "Spatial market expansion through mergers," Economics Working Papers 960, Department of Economics and Business, Universitat Pompeu Fabra.
    8. María García & Blas Pelegrín & Pascual Fernández, 2011. "Location strategy for a firm under competitive delivered prices," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(1), pages 1-23, August.
    9. Küçükaydin, Hande & Aras, Necati & Kuban AltInel, I., 2011. "Competitive facility location problem with attractiveness adjustment of the follower: A bilevel programming model and its solution," European Journal of Operational Research, Elsevier, vol. 208(3), pages 206-220, February.
    10. repec:pal:jorsoc:v:59:y:2008:i:11:d:10.1057_palgrave.jors.2602493 is not listed on IDEAS
    11. María Pérez & Pascual Hernández & Blas Pelegrín, 2004. "On price competition in location-price models with spatially separated markets," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 12(2), pages 351-374, December.
    12. Paul Berglund & Changhyun Kwon, 2014. "Solving a Location Problem of a Stackelberg Firm Competing with Cournot-Nash Firms," Networks and Spatial Economics, Springer, vol. 14(1), pages 117-132, March.
    13. Blas Pelegrín & Rafael Suárez-Vega & Saúl Cano, 2012. "Isodistant points in competitive network facility location," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 20(3), pages 639-660, October.
    14. Bai, Yun & Ouyang, Yanfeng & Pang, Jong-Shi, 2012. "Biofuel supply chain design under competitive agricultural land use and feedstock market equilibrium," Energy Economics, Elsevier, vol. 34(5), pages 1623-1633.

    More about this item

    Keywords

    Competitive location; discrete network location; spatial pricing;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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