Location strategies based on discrete choice modelsan empirical application to supermarket location

Resumen

In this paper we present a theoretic two-stage model for retailers location and consumers purchase decision. Retailers decision problem is formalized in terms of a zero-sum game, whose payoffs refers to retailers' market share and consumers decision problem is formalized in terms of a discrete choice model, based on random utilities. The theoretical models provide forecasting of equilibrium market shares and the locations to be chosen by retailers, in terms of the geographic distribution of the underlying location space (constituencies of the town), population distribution and characteristics (types) of the consumers. The theoretic model is applied to analyze empirical supermarket distributions on three villages of the Region of Valencia: Requena, Segorbe and Utiel. Departing from actual market shares in these three towns, a function relating types (young and older consumers) and sales is estimated. This estimate allows to calculate the payoff matrices for the location games corresponding to the three towns and to find out that there is just one equilibrium in pure strategies for each of them. A comparison of these equilibria and the actual location patterns of supermarkets, shows that our model explain quite well decision location but it can be improved to obtain more precise forecasts of actual market shares.