A leader-follower model for discrete competitive facility location problem under the partially proportional rule with a threshold

Abstract

When consumers are faced with the choice of competitive chain facilities that offer exclusive services, current rules do not properly describe the behavior pattern of these consumers. To eliminate the gap between the current rules and this kind of customers behavior pattern, the partially proportional rule with a threshold is proposed in this paper. A leader-follower model for discrete competitive facility location problem is established under the partially proportional rule with a threshold. Combining with the greedy strategy and the 2-opt strategy, a heuristical algorithm (GFA) is designed to solve the follower’s problem. By embedding the algorithm (GFA), an improved ranking-based algorithm (IRGA) is proposed to solve the leader-follower model. Numerical tests show that the algorithm proposed in this paper can solve the leader-follower model for discrete competitive facility location problem effectively. The effects of different parameters on the market share captured by the leader firm and the follower firm are analyzed in detail using a quasi-real example. An interesting finding is that in some cases the leader firm does not have a first-mover advantage.