Consumer choice and optimal locations models: Formulations and heuristics

Abstract.

A new direction of research in competitive location theory incorporates theories of consumer choice behavior in its models. Following this direction, the present article studies the importance of consumer behavior with respect to distance or transportation costs in the optimality of locations obtained by traditional competitive location models. We consider various ways of defining a key parameter in the basic maximum capture model (MAXCAP). This parameter will indicate a number of ways to take distance into account based on several consumer choice behavior theories. The optimal locations and the deviation in demand – captured when the optimal locations of the other models are used instead of the true ones – are computed for each model. We present a metaheuristic based on GRASP and the tabu search procedure to solve all the models. Computational experience and an application to a 55-node network are also presented.