Competitive facility location problem with foresight considering service distance limitations

Abstract

This paper presents a bi-level, nonlinear, integer programming model for the competitive facility location problem with foresight. The developed model’s objective is to maximize the leader’s market share while also taking into consideration the follower’s response. In the classical competitive facility location model, it is assumed that the facility competes for all customers, no matter how far away they are. Instead, this paper considers a new kind of customer behavior in which people only patronize facilities within a range they feel is convenient, which is more realistic than the existing models. To solve the model, a two-stage hybrid tabu search algorithm is proposed. A set of randomly generated instances are presented and analyzed statistically in order to illustrate the effectiveness of the proposed algorithm. The results indicate that the proposed algorithm provides an effective means to solve the problems and that service distance is proved to be a significant factor in the model.