A nested logit continuous competitive location problem

J. Fernández Hernández, B. G.-Tóth, G. Méndez Vogel, V. Marianov

Different customer choice rules have been proposed. The probabilistic rule assumes that customers made purchases in all available stores, in proportion to the utility of the store. In the multi-deterministic rule, customers distribute their purchases among all competitors' chains, but purchasing only at the highest utility facility of each chain. Random utility models, such as the multinomial logit, have also been applied in location models.

All those rules assume that the ratio between the utilities of two alternatives does not change by the addition of an additional option. The nested logit rule does not assume it. Applied to facility location, it assumes that consumers first choose a nest (a chain), and then a facility within the nest to make the purchase.

We present the first continuous competitive location model with the nested logit rule, which recognizes the existence of correlation between facilities of the same chain, and the hierarchical decision-making of customers.

Keywords: Competitive location, customer choice rule, random utility model, nested logit, interval analysis, branch-and-bound

GT GELOCA I: Optimization models in facility location and service design.
September 3, 2026  9:00 AM
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