Probabilistic Demands and Costs in Facility Location Problems

Abstract

When deterministic assumptions in ‘classical’ location problems are relaxed some new theoretical and algorithmic problems arise. In this paper, the definition of medians is generalized to the cases: (1) when generated demands and travel costs are random, and (2) when the demand induced at the facilities is random because of competition. Under a particular set of assumptions, the well-known theorems on ‘optimality of node locations' hold for the underlying ‘probabilistic networks’. For case (1) the model is shown to be a generalization of the probabilistic and deterministic median location problems on networks. The relationship of the model to a multicommodity location problem is also pointed out. Additionally, within the framework of the problem formulation, certain parallels with multiobjective location problems are drawn. For case (2), the competitive median location problem is formulated, and some results presented. For the special structure of probabilistic tree networks some interesting localization properties for the 1-median and 2-median are discussed.