561. Including correlated alternatives and hierarchical decision-making in customer choice rules for competitive facility location
Invited abstract in session TB-4: Topics in Competition and Games, cluster Location, Network Design, and Routing.
Tuesday, 10:30-12:00Room: CE-209
Authors (first author is the speaker)
| 1. | Vladimir Marianov
|
| Electrical Engineering, Pontificia Universidad Catolica de Chile | |
| 2. | Gonzalo Mendez-Vogel
|
| Department of Engineering Sciences, Universidad Andres Bello | |
| 3. | Armin Lüer-Villagra
|
| Department of Engineering Sciences, Universidad Andres Bello |
Abstract
In competitive facility location problems, customers decide what facility to visit to satisfy their needs, by using some choice rule. The literature has proposed several customers’ choice rules, used in competitive location models - the most popular ones based on the probabilistic gravity rule and the random utility rules, in particular the multinomial logit rule.
Most of the gravity and random utility rules used so far in location models have the property of Independence from Irrelevant Alternatives (IIA), a good representation of reality when the alternatives faced by a customer do not correlate with each other; for example, a number of stores, all belonging to different competitors and selling mutual substitutes, but not identical products. In practice, alternatives can correlate - implying, among other effects, adding a new alternative affects the ratio between the preferences for the existing ones, e.g. two competing firms with several stores, each offering the same products in all their stores.
Furthermore, the rules predominantly considered do not allow modeling sequential decisions, as occurs in practice when a customer decides to what marketplace to go and, then, to a store in the chosen marketplace.
A choice rule recently introduced in competitive facility locations, the nested logit, addresses correlation and allows modeling sequential decisions, with some developments also in hierarchical gravity-based rules. In this paper, we present nested logit and hierarchical gravity rules, compare them, and show options for formulating linear integer competitive facility location models using them - along with preliminary computational experience.
Keywords
- Location Problems
- Facilities Planning and Design
- Programming, Integer
Status: accepted
Back to the list of papers