Geoscience Reference
In-Depth Information
The most prominent difference between actual and assumed customer behavior
involves the customers' trips to the chosen facility. In particular, all competitive
models assume that customers make their individual purchases on a
special-single-
purpose trip
, while this type of trip appears fairly rare in practice (with the exception
of those trips related to work or emergency). However, a significant proportion of
trips are multistop or multipurpose, since for some types of products consumers
perform comparison shopping, visiting more than one facility selling the same item;
or use the same trip to purchase more than one type or good. This is particularly true
in a situation with high costs of fuel and long commuting distances.
One alternative is a
planned multipurpose trip with full information
.Insucha
case, a customer has set out with a plan, full knowledge about what to purchase
at the individual stores (based, e.g., on advertisements or on-line information) and
the distances between home base and individual stores (based on past experience).
Typically, such a trip resembles a traveling salesman tour; for a good recent
reference, see, e.g., Applegate et al. (
2007
). Planning multi-purpose shopping trips
has been shown to foster the agglomeration of facilities; see, e.g., Marianov and
Eiselt (
2014
).
A much more difficult extension concerns
trips without full information
.The
main aspect of this single- or multi-purpose trip involves
feature search
.Onsuch
a trip, a customer will first patronize a store, obtain information about the features
of the desired product (often, but not exclusively, its price), and will then decide,
whether to purchase the product, or continue to some other store in order to
potentially obtain a better deal. Such a search will incur certain costs (in terms
of transportation costs and time), while expecting potential advantages in terms of
better features, such as a lower price, better quality, or additional features. How
long such searches will be will certainly depend, at least in part, on the amount of
money involved and on the utility of a continued search, as compared to that of
an immediate purchase on the basis of the information gathered up to this point.
Houses, vehicles, furniture and similar high-priced items are typically purchased
in this manner. Narula et al. (
1983
) present a model that includes price search,
while Braid's (
1996
) noncompetitive location model that locates a main facility that
has the desired product, and branch facilities, which have the product with a given
probability. Customers can obtain information by means of phone search and visit
search, respectively.
An interesting strand of research involves
flow capturing
,or
flow interception
models
has been developed by Hodgson (
1990
), Berman et al. (
1995
), and Berman
and Krass (
1998
). These models replace the assumption of customers making single
trips to the chosen facility by assuming that they make purchases on their way
to work. Considering work as one part of shopping, this model is a multipurpose
shopping model with one fixed stop (work). Competing facilities will attempt to
maximize their capture of the flow of customers to work. One of the main issues in
these models involves the avoidance of double counting, i.e., customers who have
made a purchase at one facility, have their demand drop to zero and they will not
make another purchase on their trip. Typical applications for this type of behavior
include child care facilities and gas stations.
