Providing a framework to assess the competitive location of bank branches using game theory

In recent years, growth of financial and credit institutions such as banks, the competition among them and customer satisfaction has made it essential to use modern scientific methods to choose the optimum location for them. Making optimum decision in choosing the location of the financial institution reduces costs, increases efficiency and competitiveness with other companies. In some real-world problems, the decision to locate the facility is made by independent decision-makers that in addition to maximizing the benefits, compete to maintain or increase their market share. Therefore, a new branch in location has addressed the impact of competitive conditions in determining the optimal location of facilities.The present study aims to select the location of bank branches according to the existing competitors in the market and organizations that are likely to enter the market based on game theory and cooperative game approach. For this purpose, a model of game theory is offered using which one can determine the location of the new facility and obtain an equilibrium based on the concept of Nash equilibrium for the entire series. After the structure of cooperative games, value of each player is calculated according to the intended strategies for each player and coalitions’ utility. Finally, the decision-making process is done and the optimal point to establish bank branches are selected.

Providing a framework to assess the competitive location of bank branches using game theory Keywords:

Bank branches , competitive location , game theory , cooperative game , Nash equilibrium , Shapley value