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A refinement of the gravity model for competitive facility location

Author

Listed:
  • Zvi Drezner

    (California State University-Fullerton)

  • Dawit Zerom

    (California State University-Fullerton)

Abstract

Most competitive location models assume that as the distance increases, the patronage of a facility declines at the same rate regardless of the facility attractiveness. We observed that the rate at which patronage declines is slower for more attractive facilities. Customers are willing to drive long distances to patronize an attractive facility. Less attractive facilities hardly attract customers from long distances. We propose to modify the effect of attractiveness on the appeal of the facility to customers. Many methods for estimating the market share captured by a facility can be modified to incorporate such property. We implemented the new modification on the gravity model and tested it on a real data set of shopping malls in Orange County, California. The approach was statistically validated and is computationally straightforward to implement with existing software such as R. Further, new facility location decisions are expected to be more accurate due to the improved market share estimates by the proposed model.

Suggested Citation

  • Zvi Drezner & Dawit Zerom, 2024. "A refinement of the gravity model for competitive facility location," Computational Management Science, Springer, vol. 21(1), pages 1-18, June.
    • Handle: RePEc:spr:comgts:v:21:y:2024:i:1:d:10.1007_s10287-023-00484-w
    DOI: 10.1007/s10287-023-00484-w
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    References listed on IDEAS

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    1. 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.
    2. David L. Huff, 1966. "A Programmed Solution for Approximating an Optimum Retail Location," Land Economics, University of Wisconsin Press, vol. 42(3), pages 293-303.
    3. Hakimi, S. Louis, 1983. "On locating new facilities in a competitive environment," European Journal of Operational Research, Elsevier, vol. 12(1), pages 29-35, January.
    4. Drezner, Tammy & Drezner, Zvi & Salhi, Said, 2002. "Solving the multiple competitive facilities location problem," European Journal of Operational Research, Elsevier, vol. 142(1), pages 138-151, October.
    5. Hansen, Pierre & Mladenovic, Nenad, 2001. "Variable neighborhood search: Principles and applications," European Journal of Operational Research, Elsevier, vol. 130(3), pages 449-467, May.
    6. T Drezner & Z Drezner & P Kalczynski, 2012. "Strategic competitive location: improving existing and establishing new facilities," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 63(12), pages 1720-1730, December.
    7. T Drezner & Z Drezner & P Kalczynski, 2011. "A cover-based competitive location model," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(1), pages 100-113, January.
    8. Aboolian, Robert & Berman, Oded & Krass, Dmitry, 2007. "Competitive facility location model with concave demand," European Journal of Operational Research, Elsevier, vol. 181(2), pages 598-619, September.
    9. Robert Aboolian & Oded Berman & Dmitry Krass, 2009. "Efficient solution approaches for a discrete multi-facility competitive interaction model," Annals of Operations Research, Springer, vol. 167(1), pages 297-306, March.
    10. Tammy Drezner & Zvi Drezner, 2002. "Validating the Gravity-Based Competitive Location Model Using Inferred Attractiveness," Annals of Operations Research, Springer, vol. 111(1), pages 227-237, March.
    11. Frank A. Fetter, 1924. "The Economic Law of Market Areas," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 38(3), pages 520-529.
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    Cited by:

    1. Malgorzata Miklas-Kalczynska, 2024. "Extensions to Competitive Facility Location with Multi-purpose Trips," Networks and Spatial Economics, Springer, vol. 24(3), pages 565-588, September.

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