Location and quality selection for new facilities on a network market

Abstract

In this paper, the problem of determining the location and quality of new facilities in a network market is analyzed. Customers make their choice according to an attraction function, which is directly proportional to the facility quality level and decreasing with respect to the distance between customers and facilities. In order to solve the location problem, both an integer linear program and an exact algorithm are proposed. These algorithms are embedded into a branch and bound-based algorithm for solving the joint location–quality problem. An illustrative example where customers present different distance perception is presented.

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Acknowledgments

Partially financed by the Ministerio de Educación y Ciencia and FEDER, grant MTM2005-09362.

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Correspondence to Rafael Suárez-Vega.

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Suárez-Vega, R., Santos-Peñate, D.R. & Dorta-González, P. Location and quality selection for new facilities on a network market. Ann Reg Sci 52, 537–560 (2014). https://doi.org/10.1007/s00168-014-0598-0

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JEL Classification

  • C61
  • L13