Article ID: | iaor19991622 |
Country: | United Kingdom |
Volume: | 5 |
Issue: | 4 |
Start Page Number: | 227 |
End Page Number: | 246 |
Publication Date: | Dec 1997 |
Journal: | Location Science |
Authors: | Daskin Mark S., ReVelle Charles S., Hesse Susan M. |
Keywords: | -centre problem |
Facility location problems are inherently strategic in nature. One approach to dealing with the uncertainty associated with future events is to define alternative future scenarios. Planners then attempt to optimize: (1) the expected performance over all future scenarios, (2) the expected regret, or (3) the worst-case regret. Both the expected performance and the expected regret approaches assume that the planner can associate probabilities with the scenarios, while optimizing the worst-case regret obviates the need for these probabilities. Worst-case regret planning can, however, be driven by a scenario with a very small likelihood of occurrence. We present a new model that optimizes the worst-case performance over a set of scenarios that is endogenously selected from a broader exogenously specified set. The selection is based on the scenario probabilities. The new model is formulated and computational results on a moderately sized problem are presented. Model extensions are discussed.