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Market Capture Models under Various Customer-Choice Rules

Author

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  • D Serra

    (Department of Economics and Business, Universitat Pompeu Fabra, Balmes 132, Barcelona 08022, Spain)

  • H A Eiselt

    (Faculty of Administration, University of New Brunswick, PO Box 4400, Fredericton, New Brunswick, Canada F3B 5A3)

  • G Laporte

    (Centre de recherche sur les transports, Université de Montréal, Case postale 6128, succursale Centre-ville, Montreal, Canada H3C 3J7)

  • C S ReVelle

    (Department of Geography and Environmental Engineering, The Johns Hopkins University, Baltimore, MD 21218-2686, USA)

Abstract

Given that a firm currently operates p facilities in a (retail) market, a competing firm considers entering this market by locating r facilities so as to maximize its market share. This problem, known as the maximum capture problem or as the ( r | X p -medianoid problem, assumes, as do most location decision problems, that consumers always patronize the closest facility regardless of ownership or proximity to alternative facilities. In this paper we relax this assumption by allowing different customer-choice rules. Two new models are proposed for the optimal location for the entering firm under different consumer decision rules. The models are solved by using an exact method and a heuristic. Solutions are then compared with those obtained by the classical maximum capture problem with the usual nearest facility allocation rule. Computational experiments suggest that the maximum capture problem provides locational patterns whose objective values, that is, captures, are very similar to those of the other two objectives.

Suggested Citation

  • D Serra & H A Eiselt & G Laporte & C S ReVelle, 1999. "Market Capture Models under Various Customer-Choice Rules," Environment and Planning B, , vol. 26(5), pages 741-750, October.
    • Handle: RePEc:sae:envirb:v:26:y:1999:i:5:p:741-750
    DOI: 10.1068/b260741
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    Citations

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    Cited by:

    1. Drezner, Zvi & Eiselt, H.A., 2024. "Competitive location models: A review," European Journal of Operational Research, Elsevier, vol. 316(1), pages 5-18.
    2. Alvarez León, Luis F. & Aoyama, Yuko, 2022. "Industry emergence and market capture: The rise of autonomous vehicles," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    3. Tammy Drezner & Zvi Drezner & Pawel Kalczynski, 2020. "Gradual cover competitive facility location," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 42(2), pages 333-354, June.
    4. Gunhak Lee & Morton E. O'Kelly, 2009. "Exploring Locational Equilibria In A Competitive Broadband Access Market: Theoretical Modeling Approach," Journal of Regional Science, Wiley Blackwell, vol. 49(5), pages 953-975, December.
    5. 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.
    6. Haase, Knut & Müller, Sven, 2014. "A comparison of linear reformulations for multinomial logit choice probabilities in facility location models," European Journal of Operational Research, Elsevier, vol. 232(3), pages 689-691.
    7. Abdullah Dasci & Gilbert Laporte, 2005. "A Continuous Model for Multistore Competitive Location," Operations Research, INFORMS, vol. 53(2), pages 263-280, April.
    8. 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.
    9. Francisco Silva & Daniel Serra, 2008. "Incorporating waiting time in competitive location models: Formulations and heuristics," Economics Working Papers 1091, Department of Economics and Business, Universitat Pompeu Fabra.
    10. Gunhak Lee & Morton E O'Kelly, 2011. "Competitive Location Modeling with a Rank Proportional Allocation," Environment and Planning B, , vol. 38(3), pages 411-428, June.
    11. H.A. Eiselt, 2000. "Subsidy Competition in Networks," Computational and Mathematical Organization Theory, Springer, vol. 6(1), pages 99-111, May.
    12. Haase, Knut & Hoppe, Mirko, 2008. "Standortplanung unter Wettbewerb - Teil 1: Grundlagen," Discussion Papers 2/2008, Technische Universität Dresden, "Friedrich List" Faculty of Transport and Traffic Sciences, Institute of Transport and Economics.
    13. Vladimir Marianov & Daniel Serra, 2011. "Location of Multiple-Server Common Service Centers or Facilities, for Minimizing General Congestion and Travel Cost Functions," International Regional Science Review, , vol. 34(3), pages 323-338, July.

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