Competitive Location Models - Location Science - page 348

Chapter 14
Competitive Location Models

H.A. Eiselt, Vladimir Marianov, and Tammy Drezner

Abstract This chapter first provides a review of the foundations of competitive
location models. It then traces subsequent developments through the decades under
special consideration of customer behavior. After developing a general framework
for customers' decision making, the main results are put into this framework. The
conclusion outlines a number of areas, in which existing models can be refined and
made more realistic.

Keywords Hotelling models ￿ Nash equilibria ￿ von Stackelberg solutions

14.1 The Basic Model: The First 50 Years

Competitive location models were first discussed by Hotelling ( 1929 )inhisseminal
paper. It has spawned hundreds of contributions (for a summary until the early
1990s, see Eiselt et al. 1993 ) that investigate many different aspects of the basic
model. A recent summary of Hotelling-style models was provided by Eiselt ( 2011 ),
for details we refer to that work. This chapter will first introduce the basic model,
followed by an outline of some of the main components of competitive location
models. We then discuss the main aspects and types of consumer behavior, and
then review the work on competitive location models under special consideration of
customer behavior.
The basic model is easy to describe: consider a line segment, a so-called “linear
market,” which Hotelling referred to as “main street,” along which customers are