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Optimum Location of Hierarchical Production Units with Respect to Price-Elastic Demand

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  • V F Dökmeci

    (Mimarlik Fakultesi, Istanbul Teknik Unmiversitesi, Taksim, Istanbul 80191, Turkey)

Abstract

In this study, a model is designed to determine the optimum location of a hierarchical production system on a nonhomogeneous plane. The main objective of the study is to consider explicitly the ways in which alternative spatial pricing policies will affect location choice. The maximum-profit location is obtained by balancing price, demand, production cost, and transportation cost of interdependent production units. A stepwise heuristic approach is used for the solution. The solution procedure starts with the choice of the number of plants for each level of the hierarchy. The optimum set of markets is determined by the use of a minimum-distance criterion, and the demand of each market is calculated with respect to a chosen uniform price. Then the optimum location of plants is determined for each market. This procedure is repeated by using different uniform prices and by changing the number of plants until the maximum profit for the whole system is obtained.

Suggested Citation

  • V F Dökmeci, 1991. "Optimum Location of Hierarchical Production Units with Respect to Price-Elastic Demand," Environment and Planning A, , vol. 23(11), pages 1671-1678, November.
    • Handle: RePEc:sae:envira:v:23:y:1991:i:11:p:1671-1678
    DOI: 10.1068/a231671
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    References listed on IDEAS

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    1. Donald Erlenkotter, 1977. "Facility Location with Price-Sensitive Demands: Private, Public, and Quasi-Public," Management Science, INFORMS, vol. 24(4), pages 378-386, December.
    2. Greenhut, M. L. & Mai, Chao-Cheng & Norman, George, 1986. "Impacts on optimum location of different pricing strategies, market structures and customer distributions over space," Regional Science and Urban Economics, Elsevier, vol. 16(3), pages 329-351, August.
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