The maximum capture problem with random utilities: Problem formulation and algorithms

A model for the optimal location of new facilities in a competitive market is introduced under the hypothesis that customers' behavior can be modeled by random utility functions. It means that the company, that wished to locate, uses a random utility model to forecast the market share of a loca...

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Bibliographic Details
Published inEuropean journal of operational research Vol. 143; no. 3; pp. 518 - 530
Main Authors Benati, Stefano, Hansen, Pierre
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 16.12.2002
Elsevier
Elsevier Sequoia S.A
SeriesEuropean Journal of Operational Research
Subjects
Algorithms
Competition
Competitive location
Heuristic
Integer fractional programming
Integer programming
Location analysis
Market shares
Random utility theory
Studies
Utility functions
Integer fractional programming
Random utility theory
Competitive location
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Summary:A model for the optimal location of new facilities in a competitive market is introduced under the hypothesis that customers' behavior can be modeled by random utility functions. It means that the company, that wished to locate, uses a random utility model to forecast the market share of a location. Therefore the company cannot forecast the behavior of every customer in a deterministic fashion, but is able to embed him by a probability distribution. Three formulations are proposed to compute upper bounds of the objective function and compared in a numerical simulation. A branch and bound method is developed and tested on examples with up to 50 potential locations, and a Variable Neighborhood Search heuristic is proposed to solve larger instances.
ISSN:0377-2217
1872-6860
DOI:10.1016/S0377-2217(01)00340-X