Application of Taboo searching in a competitive location problem under a pricing constraint

In this paper, we discuss a bi-level programming model for facility location strategy and product pricing strategy in order to obtain the best profit in a competitive environment. The upper-level model focuses on location decision, while the lower-level model is used to investigate the Nash equilibrium prices. Based on the existence and uniqueness of a Nash equilibrium price when companies are non-cooperative in the lower-level model, a CLPH( competitive location pricing of heuristic) procedure-in which the initial solution is produced by a greedy add algorithm and a vertex substitution algorithm and the parameters in the Taboo search are set reasonably-has been designed to tackle this problem. Finally, a numerical example is presented to illustrate the feasibility and validity of this algorithm application.