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The Expected Value of Perfect Information in Facility Location

Author

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  • Z. Drezner

    (Central Michigan University, Mount Pleasant, Michigan)

  • G. O. Wesolowsky

    (McMaster University, Hamilton, Ontario)

Abstract

This paper is concerned with finding the expected value of perfect information (EVPI) in a simple facility location problem where the weights, which summarize cost and volume parameters, are random draws from a multivariate probability distribution. A model with rectangular distances and one with squared Euclidean (center of gravity) are used. The analysis is developed for a multivariate normal distribution of weights but simulation is used to show that the expressions derived are reasonably accurate for other distributions (the EVPI for the multivariate lognormal distribution is illustrated).

Suggested Citation

  • Z. Drezner & G. O. Wesolowsky, 1980. "The Expected Value of Perfect Information in Facility Location," Operations Research, INFORMS, vol. 28(2), pages 395-402, April.
    • Handle: RePEc:inm:oropre:v:28:y:1980:i:2:p:395-402
    DOI: 10.1287/opre.28.2.395
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    Cited by:

    1. Drezner, Zvi & Guyse, Jeffery, 1999. "Application of decision analysis techniques to the Weber facility location problem," European Journal of Operational Research, Elsevier, vol. 116(1), pages 69-79, July.
    2. Drezner, Zvi & Shiode, Shogo, 2007. "A distribution map for the one-median location problem on a network," European Journal of Operational Research, Elsevier, vol. 179(3), pages 1266-1273, June.

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