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Sequential Competitive Location on Networks

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Dominik Kreß

This book deals with classical competitive location problems where two players, leader and follower, sequentially enter markets with given numbers of facilities. The markets under consideration are represented as networks. The book provides a detailed overview of the literature on competitive and voting location, and it presents extensions and variations of the classical models, with a focus on the incorporation of proportional choice rules, non-discrete demand (edge demand), or additional pricing decisions of the players. It provides corresponding mathematical models, insights into the computational complexity of the resulting problems and proposes and analyzes adequate solution methods.

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Chapter 3. Competitive or Voting Locationwith Proportional Choice

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Chapter 3 Competitive or Voting Location with Proportional Choice This chapter is concerned with a competitive or voting location problem on networks under a proportional choice rule that has previously been intro- duced by Bauer et al. (1993) (cf. already Sections 2.1 and 2.2). Its contribu- tion is threefold: • First, as in Kress and Pesch (2012b), we refine a discretization result of Bauer et al. (1993) by proving convexity and concavity properties of related expected payoff functions and we answer the long time open question whether 1-suboptimal points are always vertices by providing a counterexample on a tree network. These results are presented in Section 3.2.1 and are complemented by examples and counterexamples in Section 3.2.2. • Second, in Section 3.2.3, we are concerned with implementational issues of an algorithm for determining 1-suboptimal points of a network. • Third, we will show that the choice rule of Bauer et al. (1993) can be extended to include edge demand in Section 3.3. In order to be able to define the proportional choice rule and its properties in detail, however, we will first have to introduce the concept of bottleneck points in Section 3.1 (cf. also Hakimi, 1964; Hooker et al., 1991). The chapter closes with a conclusion and remarks on future research in Section 3.4. 52 Chapter 3. Competitive or Voting Location with Proportional Choice 3.1 Bottleneck Points Let N = (V,E, λ) be a finite network. Furthermore, let [u, v] ∈ E be any edge and i ∈ N , i /∈ (u, v)...

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