Joint location and cost planning in maximum capture facility location under random utilities

DOI10.1016/J.COR.2023.106336arXiv2205.07345OpenAlexW4381952916MaRDI QIDQ6047876FDOQ6047876

Tien Mai, Ngan Ha Duong, Tien Thanh Dam, Thuy Anh Ta

Publication date: 13 September 2023

Published in: Computers \& Operations Research (Search for Journal in Brave)

Abstract: We study a joint facility location and cost planning problem in a competitive market under random utility maximization (RUM) models. The objective is to locate new facilities and make decisions on the costs (or budgets) to spend on the new facilities, aiming to maximize an expected captured customer demand, assuming that customers choose a facility among all available facilities according to a RUM model. We examine two RUM frameworks in the discrete choice literature, namely, the additive and multiplicative RUM. While the former has been widely used in facility location problems, we are the first to explore the latter in the context. We numerically show that the two RUM frameworks can well approximate each other in the context of the cost optimization problem. In addition, we show that, under the additive RUM framework, the resultant cost optimization problem becomes highly non-convex and may have several local optima. In contrast, the use of the multiplicative RUM brings several advantages to the competitive facility location problem. For instance, the cost optimization problem under the multiplicative RUM can be solved efficiently by a general convex optimization solver or can be reformulated as a conic quadratic program and handled by a conic solver available in some off-the-shelf solvers such as CPLEX or GUROBI. Furthermore, we consider a joint location and cost optimization problem under the multiplicative RUM and propose three approaches to solve the problem, namely, an equivalent conic reformulation, a multi-cut outer-approximation algorithm, and a local search heuristic. We provide numerical experiments based on synthetic instances of various sizes to evaluate the performances of the proposed algorithms in solving the cost optimization, and the joint location and cost optimization problems.

Full work available at URL: https://arxiv.org/abs/2205.07345

zbMATH Keywords

convex optimizationcompetitive facility locationconic programmingmaximum capturelocal search heuristicouter-approximationjoint location and cost optimizationmultiplicative random utility maximization

Mathematics Subject Classification ID

Operations research and management science (90Bxx)

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Cited In (3)

• Robust maximum capture facility location under random utility maximization models
• Sequential customers' decisions in facility location with comparison-shopping
• A planar facility location-allocation problem with fixed and/or variable cost structures for rural electrification

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