Article ID: | iaor20031773 |
Country: | Netherlands |
Volume: | 143 |
Issue: | 3 |
Start Page Number: | 518 |
End Page Number: | 530 |
Publication Date: | Dec 2002 |
Journal: | European Journal of Operational Research |
Authors: | Hansen Pierre, Benati Stefano |
Keywords: | heuristics, programming: fractional |
A model for the optimal location of new facilities in a competitive market is introduced under the hypothesis that customers' behavior can be modeled by random utility functions. It means that the company, that wished to locate, uses a random utility model to forecast the market share of a location. Therefore the company cannot forecast the behavior of every customer in a deterministic fashion, but is able to embed him by a probability distribution. Three formulations are proposed to compute upper bounds of the objective function and compared in a numerical simulation. A branch and bound method is developed and tested on examples with up to 50 potential locations, and a Variable Neighborhood Search heuristic is proposed to solve larger instances.