COMPETITIVE FACILITIES - MARKET SHARE AND LOCATION WITH RANDOM UTILITY

A new approach is proposed for calculating the expected market share. It is assumed that consumers patronize a facility according to a utili ty function, selecting the facility with the highest utility value. Ho wever, consumers' ratings of the utility components are stochastic by some random distribution. Therefore, the buying power of customers loc ated at the same point is divided among several facilities. A probabil ity that a consumer patronizes a certain facility can be calculated. C onsequently, the expected market share by competing facilities can be estimated. This calculation is more than 1,000 times faster than repea ting a simulation enough times to achieve a reasonable accuracy. The d istance decay calculated using the new approach is approximately expon ential. A procedure for finding the optimal location anywhere in the p lane for a new facility that maximizes the market share is also introd uced.