The Expected Value of Perfect Information in Facility Location

Z. Drezner and G. O. Wesolowsky
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Z. Drezner: Central Michigan University, Mount Pleasant, Michigan
G. O. Wesolowsky: McMaster University, Hamilton, Ontario

Operations Research, 1980, vol. 28, issue 2, 395-402

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).

Date: 1980
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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:28:y:1980:i:2:p:395-402

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