On competition in a Stackelberg location-design model with deterministic supplier choice

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9 Citations (Scopus)

Abstract

We study a market situation where two firms maximize market capture by deciding on the location in the plane and investing in a competing quality against investment cost. Clients choose one of the suppliers; i.e. deterministic supplier choice. To study this situation, a game theoretic model is formulated. We show that for the modelled situation no Nash equilibrium exists. However, a so-called Stackelberg equilibrium, where one of the firms (the leader) is aware of what the other (follower) is going to do, exists. The questions under study is whether co-location is a natural phenomenon in this case and in which situation one of the firms is not entering the market. The study requires a multi-level thinking where the decisions on location follow from the known quality investment behavior and the actions of the leader take the decisions of the follower into account.
Original languageEnglish
Pages (from-to)19-30
JournalAnnals of Operations Research
Volume246
Issue number1
DOIs
Publication statusPublished - 2016

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