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Title: Finding location equilibria for competing firms under delivered pricing
Authors: Pelegrín-Pelegrín, B.
Dorta González, Pablo 
Fernández-Hernández, P.
UNESCO Clasification: 5311 Organización y dirección de empresas
Keywords: Localización de mercados
Issue Date: 2011
Publisher: 0160-5682
Journal: Journal of the Operational Research Society 
Abstract: We address the problem of finding location equilibria of a location-price game where firms first select their locations and then set delivered prices in order to maximize their profits. Assuming that firms set the equilibrium prices in the second stage, the game is reduced to a location game for which a global minimizer of the social cost is a location equilibrium if demand is completely inelastic and marginal production cost is constant. The problem of social cost minimization is studied for both a network and a discrete location space. A node optimality property when the location space is a network is shown and an Integer Linear Programming (ILP) formulation is obtained to minimize the social cost. It is also shown that multiple location equilibria can be found if marginal delivered costs are equal for all competitors. Two ILP formulations are given to select one of such equilibria that take into account the aggregated profit and an equity criterion, respectively. An illustrative example with real data is solved and some conclusions are presented.
ISSN: 0160-5682
DOI: 10.1057/jors.2010.2
Source: Journal of the Operational Research Society[ISSN 0160-5682],v. 62, p. 729-741
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