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Competitive Location Modeling with a Rank Proportional Allocation

Author

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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)

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.

Suggested Citation

  • 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.
    • Handle: RePEc:sae:envirb:v:38:y:2011:i:3:p:411-428
    DOI: 10.1068/b35088
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    References listed on IDEAS

    as
    1. Laslier, Jean-Francois, 1996. "Rank-based choice correspondences," Economics Letters, Elsevier, vol. 52(3), pages 279-286, September.
    2. Takanori Ida & Toshifumi Kuroda, 2006. "Discrete Choice Analysis of Demand for Broadband in Japan," Journal of Regulatory Economics, Springer, vol. 29(1), pages 5-22, January.
    3. 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.
    4. Gunhak Lee & Ningchuan Xiao, 2009. "Examining the tradeoff between residential broadband service coverage and network connectivity using a bi‐objective facility location model," Papers in Regional Science, Wiley Blackwell, vol. 88(3), pages 547-562, August.
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