Incorporating competitors’ reactions in facility location decisions: A market equilibrium approach

Incorporating competitors’ reactions in facility location decisions: A market equilibrium approach

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Article ID: iaor19961965
Country: United Kingdom
Volume: 3
Issue: 4
Start Page Number: 239
End Page Number: 253
Publication Date: Dec 1995
Journal: Location Science
Authors: , ,
Keywords: competition
Abstract:

When a firm locates a new plant, and begins producing and shipping product to markets, this typically stimulates reactions by other firms supplying those markets. This suggests that to truly make a profit maximizing location decision, a firm must anticipate the market’s reaction in the location decision-making process. This paper, reviews the development of a class of models designed to determine the profit maximizing location decision for a firm seeking to establish a manufacturing facility (or facilities) on a network characterized by either competitive or oligopolistic economic competition. One particular model from this class is presented, and the importance of anticipating the reaction to a location decision is illustrated through numerical examples of the model.

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