A Generalized Two‐Agent Location Problem: Asymmetric Dynamics and Coordination

We generalize a static two‐agent location problem into dynamic, asymmetric settings. The dynamics is due to the ability of the agents to move at limited speeds. Since each agent has its own objective (demand) function and these functions are interdependent, decisions made by each agent may affect the performance of the other agent and thus affect the overall performance of the system. We show that, under a broad range of system’s parameters, centralized (system‐wide optimal) and non‐cooperative (Nash) behavior of the agents are characterized by a similar structure. The timing of these trajectories and the intermediate speeds are however different. Moreover, non‐cooperative agents travel more and may never rest and thus the system performance deteriorates under decentralized decision‐making. We show that a static linear reward approach, recently developed in Golany and Rothblum (2006), can be generalized to provide coordination of the moving agents and suggest its dynamic modification. When the reward scheme is applied, the agents are induced to choose the system‐wide optimal solution, even though they operate in a decentralized decision‐making mode.