Capacity Allocation and Pricing for Take-or-Pay Reservation Contracts

Mehdi Sharifyazdi () and Hoda Davarzani ()
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Mehdi Sharifyazdi: Chalmers University of Technology and University of Gothenburg
Hoda Davarzani: Lund University

A chapter in Operations Research Proceedings 2012, 2014, pp 395-400 from Springer

Abstract: Abstract This paper uses a bi-level optimization model to formulate a specific type of capacity reservation contracts, namely take-or-pay contracts, where a buyer reserves a portion of a supplier’s capacity before demand is realized with discounted price. At first, we formulate the lower-level problem and solve a non-linear optimization model where a buyer decides on the amount of capacity to be reserved given the discounted and normal unit capacity price, demand probability distribution and maximum available capacity. Afterwards, we construct the upper-level model where there are a supplier and multiple buyers and the supplier must choose the discounted price and maximum available capacity for each of the buyers. Enforced by the behaviour of the model, we create a bi-level real-valued genetic algorithm to find good solutions for the model.

Keywords: Capacity reservation contract; Capacity allocation; Bi-level optimization (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-319-00795-3_59

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DOI: 10.1007/978-3-319-00795-3_59

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