Analysis of traffic congestion costs in a competitive supply chain

We study a competitive facility location problem with identical suppliers competing in multiple markets subject to distribution network congestion. We first analyze the solution of a symmetric competitive location game and discuss the firms’ facility location and equilibrium market supply decisions. Then, we utilize the model to provide analytical characterization of the effects of traffic congestion costs on equilibrium distribution flows. These analytical results permit qualitative characterization of how changes in congestion levels and costs affect equilibrium location and distribution decisions. The results of extensive numerical studies serve to further illustrate the effects of traffic congestion costs on location, market supply quantity, and distribution decisions.