The Use of Random-Utility Theory in Building Location-Allocation Models

Leonardi, G. (1981). The Use of Random-Utility Theory in Building Location-Allocation Models. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-81-028

Preview

Text WP-81-028.pdf Download (1MB) | Preview

Abstract

The most important part of a location-allocation model is the allocation rule, that is, the way clients are assigned to facilities. In the well-known models of the "plant-location" family, the embedded allocation rule is the assignment of the least-travel-cost facility,

This allocation rule depends on the assumption that the cost, or more generally utility, associated with each possible facility choice is deterministically known. The simplest way to generalize a plant-location model is to add a random term to travel costs, with a known probability distribution. Such randomness may be shown to arise in many real-life situations, and the resulting choice models constitute the subject of random-utility theory,

This paper introduces the use of the random-utility modeling philosophy in location-allocation problems, Some relevant properties of the resulting family of models are derived, Among them, of special importance is the submodularity property, which relates the random-utility-based location models to a recent area of research in combinatorial optimization. Submodularity is exploited to develop simple heuristic algorithms, and the effectiveness of the approach is supported with some numerical results.

Actions (login required)

View Item