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Optimizing capacity, pricing and location decisions on a congested network with balking

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  • Hossein Abouee-Mehrizi
  • Sahar Babri
  • Oded Berman
  • Hassan Shavandi

Abstract

In this paper, we consider the problem of making simultaneous decisions on the location, service rate (capacity) and the price of providing service for facilities on a network. We assume that the demand for service from each node of the network follows a Poisson process. The demand is assumed to depend on both price and distance. All facilities are assumed to charge the same price and customers wishing to obtain service choose a facility according to a Multinomial Logit function. Upon arrival to a facility, customers may join the system after observing the number of people in the queue. Service time at each facility is assumed to be exponentially distributed. We first present several structural results. Then, we propose an algorithm to obtain the optimal service rate and an approximate optimal price at each facility. We also develop a heuristic algorithm to find the locations of the facilities based on the tabu search method. We demonstrate the efficiency of the algorithms numerically. Copyright Springer-Verlag 2011

Suggested Citation

  • Hossein Abouee-Mehrizi & Sahar Babri & Oded Berman & Hassan Shavandi, 2011. "Optimizing capacity, pricing and location decisions on a congested network with balking," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 74(2), pages 233-255, October.
    • Handle: RePEc:spr:mathme:v:74:y:2011:i:2:p:233-255
    DOI: 10.1007/s00186-011-0361-6
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    References listed on IDEAS

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    Cited by:

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    3. Hoseinpour, Pooya & Jalili Marand, Ata, 2022. "Designing a service system with price- and distance-sensitive demand: A case study in mining industry," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1355-1371.
    4. Hoseinpour, Pooya & Ahmadi-Javid, Amir, 2016. "A profit-maximization location-capacity model for designing a service system with risk of service interruptions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 96(C), pages 113-134.
    5. Hoon Jang, 2019. "Designing capacity rollout plan for neonatal care service system in Korea," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 41(3), pages 809-830, September.
    6. Ebrahim Teimoury & Mohammad Modarres & Morteza Neishaboori, 2020. "Cost-based differential pricing for a make-to-order production system in a competitive segmented market," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(4), pages 266-275, August.
    7. Teodora Dan & Andrea Lodi & Patrice Marcotte, 2020. "Joint location and pricing within a user-optimized environment," EURO Journal on Computational Optimization, Springer;EURO - The Association of European Operational Research Societies, vol. 8(1), pages 61-84, March.
    8. S. Nobakhtian & A. Raeisi Dehkordi, 2018. "A fast algorithm for the rectilinear distance location problem," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 88(1), pages 81-98, August.
    9. Teodora Dan & Patrice Marcotte, 2019. "Competitive Facility Location with Selfish Users and Queues," Operations Research, INFORMS, vol. 67(2), pages 479-497, March.

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