Perception and information in a competitive location model

Abstract

This paper considers a situation in which two competitors locate one facility each at the vertices of a tree. Their decisions are based on the capture of demands at the vertices of the tree. As opposed to the usual models, it is assumed that the true demands are unknown and that each competitor has its own perception of them. The paper investigates a facility planner's advantage that results from knowledge concerning his competitor's perception. Stackelberg solutions are analyzed as well as possible advantages to the competitor who locates first.