Article (Scientific journals)
Competitive facility location problem with attractiveness adjustment of the follower: A bilevel programming model and its solution
Kucukaydin, Hande; Aras, Necati; Altinel, I. Kuban
2011In European Journal of Operational Research, 208 (3), p. 206-220
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Keywords :
competitive facility location; bilevel programming; mixed-integer nonlinear programming; variable facility attractiveness
Abstract :
[en] We are concerned with a problem in which a firm or franchise enters a market by locating new facilities where there are existing facilities belonging to a competitor. The firm aims at finding the location and attractiveness of each facility to be opened so as to maximize its profit. The competitor, on the other hand, can react by adjusting the attractiveness of its existing facilities with the objective of maximizing its own profit. The demand is assumed to be aggregated at certain points in the plane and the facilities of the firm can be located at predetermined candidate sites. We employ Huff's gravity-based rule in modeling the behavior of the customers where the fraction of customers at a demand point that visit a certain facility is proportional to the facility attractiveness and inversely proportional to the distance between the facility site and demand point. We formulate a bilevel mixed-integer nonlinear programming model where the firm entering the market is the leader and the competitor is the follower. In order to find the optimal solution of this model, we convert it into an equivalent one-level mixed-integer nonlinear program so that it can be solved by global optimization methods. Apart from reporting computational results obtained on a set of randomly generated instances, we also compute the benefit the leader firm derives from anticipating the competitor's reaction of adjusting the attractiveness levels of its facilities. The results on the test instances indicate that the benefit is 58.33% on the average.
Disciplines :
Production, distribution & supply chain management
Author, co-author :
Kucukaydin, Hande ;  Université de Liège - ULiège > HEC-Ecole de gestion : UER > UER Opérations : Supply Chain Management
Aras, Necati
Altinel, I. Kuban
Language :
English
Title :
Competitive facility location problem with attractiveness adjustment of the follower: A bilevel programming model and its solution
Publication date :
2011
Journal title :
European Journal of Operational Research
ISSN :
0377-2217
eISSN :
1872-6860
Publisher :
Elsevier Science, Amsterdam, Netherlands
Volume :
208
Issue :
3
Pages :
206-220
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBi :
since 15 January 2013

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