The probabilistic customer's choice rule with a threshold attraction value: Effect on the location of competitive facilities in the plane

Abstract

The classical probabilistic choice rule assumes that customers patronize all the existing facilities. As this assumption may not be appropriate in some cases, in this paper a variant is investigated, in which a customer only patronizes those facilities for which he/she feels an attraction greater than or equal to a threshold value. Implicitly, this implies that there may be some unmet demand. We apply this modified rule to the problem of locating a single new facility in the plane. A comparison of the location decisions derived from the modified rule with those obtained with the classical proportional choice rule when solving the location model reveals that the profit that the locating chain may lose if an inadequate choice rule is employed may be quite high in some instances.