ON THE LOGIT APPROACH TO COMPETITIVE FACILITY LOCATION

The random utility model in competitive facility location is one appro ach for estimating the market share captured by a retail facility in a competitive environment. However, it requires extensive computational effort for finding the optimal location for a new facility because it s objective function is based on a h-dimensional integral. In this pap er we show that the random utility model can be approximated by a legi t model. The proportion of the buying power at a demand point that is attracted to the new facility can be approximated by a legit function of the distance to it. This approximation demonstrates that using the legit function of the distance for estimating the market share is theo retically founded in the random utility model. A simplified random uti lity model is defined and approximated by a legit function. An iterati ve Weiszfeld-type algorithm is designed to find the best location for a new facility using the legit model. Computational experiments show t hat the legit approximation yields a good location solution to the ran dom utility model.