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The Follower Competitive Location Problem with Comparison-Shopping

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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.

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Acknowledgements

We gratefully acknowledge the support by Grant FONDECYT 1160025 and by the Complex Engineering Systems Institute through grant CONICYT PIA FB0816.

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Authors and Affiliations

  1. Department of Electrical Engineering, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna, 4860, Santiago, Chile

    Vladimir Marianov

  2. Faculty of Business Administration, University of New Brunswick, Fredericton, NB, Canada

    H. A. Eiselt

  3. Engineering Science Department, Universidad Andres Bello, Santiago, Chile

    Armin Lüer-Villagra

Authors
  1. Vladimir Marianov
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  2. H. A. Eiselt
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  3. Armin Lüer-Villagra
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Correspondence to Vladimir Marianov.

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Marianov, V., Eiselt, H.A. & Lüer-Villagra, A. The Follower Competitive Location Problem with Comparison-Shopping. Netw Spat Econ 20, 367–393 (2020). https://doi.org/10.1007/s11067-019-09481-6

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