Surviving in a Competitive Spatial Market: The Threshold Capture Model

Universitat Pompeu Fabra Economics Working Paper No. 359

25 Pages Posted: 21 Jul 1999

See all articles by Daniel Serra

Daniel Serra

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Charles ReVelle

Deceased

Ken Rosing

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: February 2, 1999

Abstract

Most facility location decision models ignore the fact that for a facility to survive it needs a minimum demand level to cover costs. In this paper we present a decision model for a firm that wishes to enter a spatial market where there are several competitors already located. This market is such that for each outlet there is a demand threshold level that has to be achieved in order to survive. The firm wishes to know where to locate its outlets so as to maximize its market share taking into account the threshold level. It may happen that due to this new entrance, some competitors will not be able to meet the threshold and therefore will disappear. A formulation is presented together with a heuristic solution method and computational experience.

JEL Classification: C61, R12, R53

Suggested Citation

Serra, Daniel and ReVelle (deceased), Charles and Rosing, Ken, Surviving in a Competitive Spatial Market: The Threshold Capture Model (February 2, 1999). Universitat Pompeu Fabra Economics Working Paper No. 359, Available at SSRN: https://ssrn.com/abstract=159227 or http://dx.doi.org/10.2139/ssrn.159227

Daniel Serra (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34) 93 542 16 66 (Phone)
(34) 93 542 17 46 (Fax)

Ken Rosing

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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