Location selection of BPO vendors based on a game theory model

Based on two-stage location selection model, taking into account of network externality and brand loyalty effect in the competitive market, this paper establishes a investment location selection model for vendors of Business Process Outsourcing (BPO). Enterprises providing BPO service, elements affecting its selection of investment location, and city competition strategies are analyzed. We discovered that by employing the strategies of differential development, strengthening network externality effect, and increasing market share in the early stage, price competition can be reduced, and the development of BPO industry can be guided into a virtuous cycle.