Competitive Location Modeling with a Rank Proportional Allocation

Gunhak Lee and Morton E O'Kelly
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Gunhak Lee: Department of Social Studies, Ewha Womans University, 11-1 Daehyun-Dong, Seodaemun-Gu, Seoul, 120-750, South Korea
Morton E O'Kelly: Department of Geography, The Ohio State University, 1036 Derby Hall, 154 North Oval Mall, Columbus, OH 43210, USA

Environment and Planning B, 2011, vol. 38, issue 3, 411-428

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.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:sae:envirb:v:38:y:2011:i:3:p:411-428

DOI: 10.1068/b35088

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