Robust maximum capture facility location under random utility maximization models

Tien Thanh Dam, Thuy Anh Ta and Tien Mai

European Journal of Operational Research, 2023, vol. 310, issue 3, 1128-1150

Abstract: We study a robust version of the maximum capture facility location problem in a competitive market, assuming that each customer chooses among all available facilities according to a random utility maximization (RUM) model. We employ the generalized extreme value (GEV) family of models and assume that the parameters of the RUM model are not given exactly but lie in convex uncertainty sets. The problem is to locate new facilities to maximize the worst-case captured user demand. We show that, interestingly, our robust model preserves the monotonicity and submodularity from its deterministic counterpart, implying that a simple greedy heuristic can guarantee a (1−1/e) approximation solution. We further show the concavity of the objective function under the classical multinomial logit (MNL) model, suggesting that an outer-approximation algorithm can be used to solve the robust model under MNL to optimality. We conduct experiments comparing our robust method to other deterministic and sampling approaches, using instances from different discrete choice models. Our results clearly demonstrate the advantages of our robust model in protecting the decision-maker from worst-case scenarios.

Keywords: Facilities planning and design; Maximum capture; Random utility maximization; Robust optimization; Local search; Uuter-approximation (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:310:y:2023:i:3:p:1128-1150

DOI: 10.1016/j.ejor.2023.04.024

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