Solving a Huff-like competitive location and design model for profit maximization in the plane

Solving a Huff-like competitive location and design model for profit maximization in the plane

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Article ID: iaor2009139
Country: Netherlands
Volume: 179
Issue: 3
Start Page Number: 1274
End Page Number: 1287
Publication Date: Jun 2007
Journal: European Journal of Operational Research
Authors: , , ,
Keywords: optimization
Abstract:

A chain wants to set up a single new facility in a planar market where similar facilities of competitors, and possibly of its own chain, are already present. Fixed demand points split their demand probabilistically over all facilities in the market proportionally with their attraction to each facility, determined by the different perceived qualities of the facilities and the distances to them, through a gravitational or logit type model. Both the location and the quality (design) of the new facility are to be found so as to maximise the profit obtained for the chain. Several types of constraints and costs are considered. Two solution methods are developed and tested. The first is a repeated local optimisation heuristic, extending earlier proposals to the supplementary design question and the presence of locational constraints. The second is an exact global optimisation technique.

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