Effect of source and transport costs in the optimal location of distribution centres

The aim of this paper is to study the optimal locations of distribution centers for an entering firm when there are changes in production and transportation costs. The firm competes with other firms under delivered pricing and the equilibrium prices are offered in each market. The study is applied to the transportation network of the Region of Murcia (Spain), where the markets are the municipalities and a linear demand function which depends on the size of the population is used. Optimal locations and profits are obtained in different scenarios for a variety of values of the production and transportation costs.