A hierarchical mathematical programming approach is combined with sensitivity analysis (of variational inequalities) to formulate a facility-location model for a firm competing on a discrete network. It is assumed that the locating firm will act as the leader firm in an industry characterized by Stackelberg leader-follower(s) oligopolistic competition. The other n competitors in this industry are assumed to act as Cournot firms that each operate under the Cournot assumption of zero conjectural variation with respect to their n - 1 Cournot competitors. It is further assumed that the n Cournot firms will react to the location/production/shipping activities of the Stackelberg firm. Therefore, when the Stackelberg firm makes its location, production, and shipping decisions it takes into account the reaction of the n Cournot firms to its (the Stackelberg firm's) integrated location and distribution decisions. Specifically, a Cournot reaction function is developed and imbedded in the Stackelberg firm's profit-maximizing objective function to project the anticipated reaction of the Cournot firms to the Stackelberg firm's location decision.
All Science Journal Classification (ASJC) codes
- Geography, Planning and Development
- Environmental Science (miscellaneous)