COMPETITIVE STORE CLOSING DURING AN ECONOMIC DOWNTURN: A MATHEMATICAL PROGRAMMING APPROACH

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Mayadunne, S. (2014). COMPETITIVE STORE CLOSING DURING AN ECONOMIC DOWNTURN: A MATHEMATICAL PROGRAMMING APPROACH. Unc Charlotte Electronic Theses And Dissertations.
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Abstract

A game theoretic mixed integer program model is introduced to determine optimal store closing decisions in a competitive market. The model considers the case of two rival firms seeking to downsize operations in a region. Both firms are looking to reduce operating costs by closing a number of stores while minimizing demand lost to its rival. We assume a competitive game and apply the model is to find the equilibrium store closing decisions. The model is first applied to a competitive environment for a single period and then incorporated into a solution procedure for a multi-period game. The model facilitates the analysis of different strategies that can be used by a retail chain to maximize revenue in depressed market conditions. We find that the profitability is not always the most important factor to consider when determining the number and locations of stores to be closed and that an increase in demand variance will increase the likelihood that an unprofitable store will be kept open for an extended period of time. Our results further indicate that, depending on individual store characteristics it may be optimal to close a profitable store. Our results provide guidelines for developing effective strategies to systematically reduce the number of stores so that net revenue is maximized while competitive pressure is exerted on rival stores.

Details
Author

Mayadunne, Sanjaya

Title

COMPETITIVE STORE CLOSING DURING AN ECONOMIC DOWNTURN: A MATHEMATICAL PROGRAMMING APPROACH

Physical Description

1 online resource (96 pages) : PDF

Date

2014

Degree Granting Institution

University of North Carolina at Charlotte

Abstract

A game theoretic mixed integer program model is introduced to determine optimal store closing decisions in a competitive market. The model considers the case of two rival firms seeking to downsize operations in a region. Both firms are looking to reduce operating costs by closing a number of stores while minimizing demand lost to its rival. We assume a competitive game and apply the model is to find the equilibrium store closing decisions. The model is first applied to a competitive environment for a single period and then incorporated into a solution procedure for a multi-period game. The model facilitates the analysis of different strategies that can be used by a retail chain to maximize revenue in depressed market conditions. We find that the profitability is not always the most important factor to consider when determining the number and locations of stores to be closed and that an increase in demand variance will increase the likelihood that an unprofitable store will be kept open for an extended period of time. Our results further indicate that, depending on individual store characteristics it may be optimal to close a profitable store. Our results provide guidelines for developing effective strategies to systematically reduce the number of stores so that net revenue is maximized while competitive pressure is exerted on rival stores.

Genre

doctoral dissertations

Subjects--Topics

Operations research

Degree

Ph.D.

Subject Area

Computer Science

Advisor(s)

Saydam, Cem
Johar, Monica

Committee Members

Khouja, Moutaz
Park, Sungjune
Ozelkan, Ertunga

Degree Note

Thesis (Ph.D.)--University of North Carolina at Charlotte, 2014.

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Rights Holder Information

Copyright is held by the author unless otherwise indicated.

Identifier

Mayadunne_uncc_0694D_10639

Permalink

http://hdl.handle.net/20.500.13093/etd:1696