Facility location in anticipation of future competition

Abstract

In this paper, we consider locating a new facility in a competitive environment. A future competitor is expected to enter the market and locate his facility at its best site. The best location for one's own facility is to be found such that the market share captured following the competitor's entry is maximized. The problem is complicated because the best location for the competitor depends on the selected location for one's own facility. The problem is formulated using the gravity model for the estimation of market share. Three heuristic solution procedures are proposed. Computational experiments with these heuristics are presented.