An exact procedure and LP formulations for the leader-follower location problem

Abstract

The leader-follower location problem consists of determining an optimal strategy for two competing firms which make decisions sequentially. The leader optimisation problem is to minimise the maximum market share of the follower. The objective of the follower problem is to maximise its market share. We describe linear programming formulations for both problems and analyse the use of these formulations to solve the problems. We also propose an exact procedure based on an elimination process in a candidate list. © 2009 Sociedad de Estadística e Investigación Operativa.