Question

In: Statistics and Probability

A community is currently being served a single self-serve gas station with six pumps. A competitor...

A community is currently being served a single self-serve gas station with six pumps. A competitor is opening a new facility with 12 pumps across town. The table below shows the travel times in minutes from the four different areas in the community to the sites and the number of customers in each area.

(a) Using the Huff retail location model and if λ = 2, calculate the probability of a customer traveling from each area to each site.

(b) Estimate the proportion of the existing market lost to the new competitor.

Travel Times to Gas Stations (in minutes)

Area Area 1 Area 2 Area 3 Area 4
Old Station 5 10 9 15
New Competitor 20 8 12 6
No. of Customers 100 150 80 50

Solutions

Expert Solution

ANSWER::

(a)

The probability of a consumer at point i travelling to retail j is given by the following formula:

(b)

market loss = 12(100) + 76(150) + 53(80) + 93(50)

= 215

percent loss = 215 / 380 = 57 %.

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orchestra answered 1 year ago
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