Joint location and pricing within a user-optimized environment

Abstract

In the design of service facilities, whenever the behaviour of customers is impacted by queueing or congestion, the resulting equilibrium cannot be ignored by a firm that strives to maximize revenue within a competitive environment. In the present work, we address the problem faced by a firm that makes decisions with respect to location, service levels and prices and that takes explicitly into account user behaviour. This situation is modelled as a nonlinear mathematical program with equilibrium constraints that involves both discrete and continuous variables, and for which we propose an efficient algorithm based on an approximation that can be solved for its global optimum.

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Notes

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    A detailed description of the NEOS server computers’ specifications can be found here https://neos-guide.org/content/FAQ.

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Correspondence to Teodora Dan.

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Dan, T., Lodi, A. & Marcotte, P. Joint location and pricing within a user-optimized environment. EURO J Comput Optim 8, 61–84 (2020). https://doi.org/10.1007/s13675-019-00120-w

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Keywords

  • Pricing
  • Location pricing
  • Bilevel programming
  • Mixed-integer programming
  • Equilibrium
  • Queueing
  • Nonconvex

Mathematics Subject Classification

  • 90C11
  • 90C26
  • 90C30
  • 90C33