Constrained location of competitive facilities in the plane
This paper examines a competitive facility location problem occurring in the plane. A new gravity-based utility model is developed, in which the capacity of a facility serves as its measure of attractiveness. A new problem formulation is given, having elastic gravity-based demand, along with capacity, forbidden region, and budget constraints. Two solution algorithms are presented, one based on the big square small square method, and the second based on a penalty function formulation using fixed-point iteration. Computational testing is presented, comparing these two algorithms along with a general-purpose nonlinear solver. In a competitive business environment where products are not distinguishable, facility location plays an important role in an organization's success. This paper examines a firm's problem of selecting the locations in the plane for a set of new facilities such that market capture is maximized across all of the firm's facilities (both new and pre-existing). Customers are assumed to divide their demand among all competing facilities according to a utility function that considers facility attractiveness (measured by facility capacity for satisfying demand) and customer-facility distance. The level of customer demand is assumed to be a function of the facility configuration. Three types of constraints are introduced, involving facility capacity, forbidden regions for new facility location, and a budget function. Two solution algorithms are devised, one based on branch-and-bound methods and the other based on penalty functions. Computational testing is presented, comparing these two algorithms along with a general-purpose nonlinear solver.
competitive facility location forbidden regions penalty functions elastic demand nonconvex optimization