The Follower Competitive Location Problem with Comparison-Shopping

Vladimir Marianov (), H. A. Eiselt () and Armin Lüer-Villagra ()
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Vladimir Marianov: Pontificia Universidad Católica de Chile
H. A. Eiselt: University of New Brunswick
Armin Lüer-Villagra: Universidad Andres Bello

Networks and Spatial Economics, 2020, vol. 20, issue 2, No 2, 367-393

Abstract: Abstract In competitive settings, firms locate their stores to take advantage of consumers’ behavior to maximize their market share. A common behavior is comparison-shopping: in this behavioral pattern, consumers visit multiple stores that sell non-identical products, which are mutual substitutes, before making their purchase decision. This behavior has never been included in location-prescribing models for competitive firms. Given existing branches of one firm, we address the location problem of a follower firm that locates its own branches. We present insights on the instance used by ReVelle in his maximum capture formulation, provide computational experience with one thousand 100-node instances, and consider a realistic case using a 353-node network of Santiago, Chile. The results are compared in terms of the demand captured by each firm and the locational patterns that result from different consumer behaviors.

Keywords: Competitive location; Comparison-shopping; Follower problem (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11067-019-09481-6

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