Retail store location and pricing within a competitive environment using constrained multinomial logit

•Consumers’ maximum willingness to pay constraints are considered by means of cut-off functions.•PSO approach allows to the prices and locations together, which is useful for planning purposes.•We considered competition among new and already installed stores.•Location depends on consumers’ maximum willingness to pay. The purpose of this paper is to report a pricing and retail location model using the constrained multinomial logit (CMNL), which takes into account customers’ utility and maximum willingness to pay via cut-off soft-constraints. The proposed model is probabilistic and non-linear, therefore a PSO metaheuristic approach was designed to determine the most suitable price, store locations and demand segmentation. The results obtained in test-cases showed a close relationship between price and location decisions. In addition, the results suggest that not only price, but also location decisions are affected when the consumers’ maximum willingness to pay is considered.