Facility location for market capture when users rank facilities by shorter travel and waiting times. http://dx.doi.org/10.1016/j.ejor.2007.07.025

Abstract

A firm wants to locate several multi-server facilities in a region where there is already a competitor operating. We propose a model for locating these facilities in such a way as to maximize market capture by the entering firm, when customers choose the facilities they patronize, by the travel time to the facility and the waiting time at the facility. Each customer can obtain the service or goods from several (rather than only one) facilities, according to a probabilistic distribution. We show that in these conditions, there is demand equilibrium, and we design an ad hoc heuristic to solve the problem, since finding the solution to the model involves finding the demand equilibrium given by a nonlinear equation. We show that by using our heuristic, the locations are better than those obtained by utilizing several other methods, including MAXCAP, p-median and location on the nodes with the largest demand.