Modelling lost demand in competitive facility location

Modelling lost demand in competitive facility location

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Article ID: iaor2012137
Volume: 63
Issue: 2
Start Page Number: 201
End Page Number: 206
Publication Date: Feb 2012
Journal: Journal of the Operational Research Society
Authors: ,
Keywords: demand, facilities, location
Abstract:

In this paper, we propose a simple new approach to model lost demand (also referred to as elastic demand) in competitive facility location. A ‘dummy’ competing facility that attracts the lost demand is added to the list of competing facilities. All competitive facility location models, regardless of their complexity or assumptions, can be modified to include lost demand and be solved by the same algorithms designed for standard models once the dummy facility is added to the data as an additional competitor.

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