Sequential versus simultaneous approach in the location and design of two new facilities using planar Huff-like models

Boglarka Toth, Jose Fernandez, Blas Pelegrin, Frank Plastria

    Research output: Contribution to journalArticlepeer-review

    40 Citations (Scopus)

    Abstract

    Companies frequently decide on the location and design for new facilities in a sequential way. However, for a fixed number of new facilities, the company might be able to improve its profit by taking its decisions for all the facilities simultaneously. In this paper we compare three different strategies: simultaneous location and independent design of two facilities in the plane, the same with equal designs, and the sequential approach of determining each facility in turn.
    The basic model is profit maximization for the chain, taking market share, location costs and design costs into account. The market share captured by each facility depends on the distance to the customers (location) and its quality (design),
    through a probabilistic Huff-like model. Recent research on this type of models was aimed at finding global optima for a single new facility, holding quality fixed or variable, but no exact algorithm has been proposed to find optimal solutions for more than one facility.
    We develop such an exact interval branch-and-bound algorithm to solve both simultaneous location and design 2-facilities problems. Then, we present computational results and exhibit the differences in locations and qualities of the optimal solutions one may obtain by the sequential and simultaneous approaches.
    Original languageEnglish
    Pages (from-to)1393-1405
    Number of pages13
    JournalComputers and Operations Research
    Volume36
    Publication statusPublished - 2009

    Keywords

    • Continuous location
    • Facility design
    • Competition
    • Global optimization
    • Interval analysis

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