European Journal of Operational Research 129 (2001) 461±470

www.elsevier.com/locate/dsw

Invited Review

Static competitive facility location:

An overview of optimisation approaches
Frank Plastria *

Department of Management Informatics, BEIF ± Vrije Universiteit Brussel, Pleinlaan 2, B 1050 Brussels, Belgium
Received 01 July 1999; accepted 29 May 2000

Abstract

We give an overview of the research, models and literature about optimisation approaches to the problem of op-
timally locating one or more new facilities in an environment where competing facilities are already estab-
lished. Ó 2001 Elsevier Science B.V. All rights reserved.

Keywords: Facility location; Competition; Consumer behaviour

1. Introduction in the market and that the new facility(ies) will

A large part of location theory in operational
research has been built around the (mostly im-
plicit) modelling assumption of a spatial monop-
oly: the facility to be located o€ers a unique
product or service and is the single player in the
part of the market that is considered. Most situa-
tions in practice do not ®t such models and the
need arises to incorporate competition with other
players. This has long been understood by econ-
omists who have studied competition, including its
spatial aspects, for some 70 years.
A location model is said to be about competitive
facilities when it explicitly incorporates the fact
that other facilities are already (or will be) present
*
Tel.: +32-26293609; fax: +32-26293690.
E-mail address: frank.plastria@vub.ac.be (F. Plastria).
have to compete with them for its (their) market
share. The apparent simplicity of this statement
hides several implicit and explicit notions which
have to be made more precise before a clear and
well-de®ned model arises.
It is the aim of this paper to give an overview of
these questions and the many di€erent ways in
which they may be ®lled in, leading to as many
di€erent models with corresponding theoretical
results and/or techniques. Many survey papers
about this research area have already appeared in
print, such as [14,19,21±23,34,61].
What distinguishes this survey is its emphasis
on the part of the ®eld clearly lying within Oper-
ational Research and in which several develop-
ments have taken place in recent years: we focus
our attention towards those competitive location
models which are directly phrased as (one stage)
optimisation problems.

0377-2217/01/$ - see front matter Ó 2001 Elsevier Science B.V. All rights reserved.
PII: S 0 3 7 7 - 2 2 1 7 ( 0 0 ) 0 0 1 6 9 - 7
462 F. Plastria / European Journal of Operational Research 129 (2001) 461±470
2. Ingredients
We start by a discussion of the di€erent ingre-
dients and their ¯avors that enter into the recipe of
competitive location models. The three main
questions are related to the competition, to the
market, and to the decision space.
2.1. Features of competition
2.1.1. Static competition
The simplest competitive models arise when
competition is assumed to be already present in the
market. The whereabouts and characteristics of
this competition are known in advance and as-
sumed to be ®xed. This kind of static situations are
discussed in more detail in the remainder of this
paper.
Such models correspond to a short term view:
they are based on the assumption that the time
and/or e€ort/cost needed for the competition to
react is suciently long to harvest the main ben-
e®ts of the new facility. These models also form the
basis on which more complex models may be built.
2.1.2. Competition with foresight
The situation becomes quite di€erent when a
virgin market is entered in the knowledge that
other competing actors will enter it soon after-
wards. It will then be necessary to make decisions
with foresight about this competition, which itself
will enter a market where competition is already
present. The ensuing Stackelberg-type models,
where each evaluation of the main objective in-
volves the solution of the competitor's nontrivial
optimisation model, quickly become extremely
complex. We enter here the realm of sequential
models, which were recently extensively surveyed
in [21].
2.1.3. Dynamic models and competitive equilibrium
Existing competition will most probably alter
its strategy when it loses part of or even all of its
market share to a newcomer, implying that the
competitive environment changes. This leads to
dynamic models which aim at describing the ac-
tion/reaction cycles of the competing actors.
One of the traditional questions in this respect
is the possible (in)existence of equilibrium situa-
tions, dear to economists, to which such a system
might evolve. It is in fact this point of view that
forms the root of competitive location theory
thanks to the seminal paper of Hotelling [39]. This
large area of research has been most often sur-
veyed, see e.g., [19,22±24,34,38,46] and will not be
discussed here.
2.2. Features of the market
Demand for the facility's product(s) and/or
service(s) forms the raison d'^etre of competition.
The spatial distribution, characteristics and beha-
viour of demand are therefore paramount in the
model's description. Current models in the
framework to be discussed, do not di€erentiate
between several products, or consider any prod-
uct-mix questions. Therefore, in all what follows,
demand is assumed to be for one product only,
which might, however, represent a complete
product class, like `food' or `clothing'.
The term customer is used in a rather loose
fashion, and may have di€erent interpretation in
di€erent applications. Typically a customer is an
individual or a group of such with a unique and
identi®able location and behaviour. In practice
this may mean that the same person should be
considered as several customers in order to dis-
tinguish between several (location, behaviour)
pairs, such as (at home, personal time) and (at
work, professional time). Since a customer has a
location and issues demand, we freely use the term
demand point as a synonym.
Finally we use the term market for the collec-
tion of all customers and their demand.
2.2.1. Point vs. regional demand
Where does demand originate? Is it discrete,
i.e., concentrated in a ®nite set of points or rather
continuously dispersed over a region? In both
cases a precise description is needed of its spatial
distribution.
In case of point demand its volume, be it ex-
pressed in terms of quantity, frequency and/or
currency (then sometimes called `buying power'),
 F. Plastria / European Journal of Operational Research 129 (2001) 461±470
at each demand point should be given. For re-
gional demand this is described by a continuous
spatial distribution, often assumed to be uniform.
It may be argued that in principle individual
customers form a discrete set, so should be de-
scribed by a point distribution. However, there are
usually too many individuals involved and their
location in space is not ®xed in time, hence a
continuous distribution might also be necessary
and/or adequate. Observe, however, that regional
demand typically has meaning only in a continu-
ous or network environment (see below).
2.2.2. Quality elastic vs. inelastic demand
Next it must be determined whether demand is
elastic or inelastic with respect to quality. In other
words does the volume of demand, depend on the
(conditions of) supply or may it be considered as
®xed.
This will largely be determined by the product
type. It is customary to consider demand for es-
sential goods such as bread to be inelastic (within
time-periods during which populations may be
considered as constant), as opposed to inessential,
e.g., luxury, goods for which demand may be
highly supply/price sensitive.
Demand may also vary independently of the
supply, due to the inevitable uncertainties in the
market's description, or due to inherent random-
ness, e.g., weather e€ects. Such situations then are
modelled by stochastic demand. For models of this
type we refer to [15,51].
2.2.3. Patronising behaviour
In order to be able to determine the market
share of a facility it is necessary to describe in a
precise manner which part of the demand will be
captured by each of the competing facilities. This
involves the way customers behave when making
the choice which of several facilities to patronize.
It is generally considered that each customer
feels some attraction towards each of the com-
peting facilities. It is the way these attraction
forces determine the actual patronising choice
which leads to two quite di€erent types of cus-
tomer behaviour models.
This choice is deterministic when the full de-
mand of each customer is served by the facility to
463
which it is attracted most. This conceptually sim-
ple patronising rule is the most common one in the
literature. Basically it assumes that as long as the
supply side remains unchanged customers will al-
ways patronise one and the same facility.
The deterministic rule stated above does not
clarify what happens in the case of ties, in other
words when a customer feels equally and maxi-
mally attracted towards several facilities, including
a new one. Several tie resolution rules may be
considered: either the demand is (equally ?) split
over all tied facilities, or it goes fully towards the
new facility, or may stick to the competing facili-
ty(ies).
A deterministic choice rule does not allow for
the `changing mood' of customers. The choice is
probabilistic when each customer splits its volume
of demand over the di€erent facilities, with prob-
abilities determined some way by the attraction
felt towards each facility. At present this seems to
be the only alternative proposed to the determin-
istic `all or nothing' rule.
2.2.4. Attraction function
The attraction function describes how a cus-
tomer's attraction (also often called utility, par-
ticularly in economics) towards a facility is
obtained. In location theory it is always assumed
that some notion of distance between customer
and facility plays a crucial role in this attraction.
Typically attraction will decrease with distance
and the attraction function describes in what pre-
cise way.
In case all competing facilities, existing and
new, are uniform, i.e., apart from their site they are
further indistinguishable in the sense that they
o€er exactly comparable, and thus substitutable,
products and services at the same prices, the dis-
tance will be the sole determinant in the attraction.
It may be observed that in this case it is usually
considered that only deterministic behaviour ap-
plies.
In many cases, however, facilities are multiform,
i.e., they do di€er in other aspects than the mere
site where they are located, and customers will
take these di€erences into account in the way they
feel attracted to them. These di€erences should
then be incorporated into the attraction function,
464 F. Plastria / European Journal of Operational Research 129 (2001) 461±470
as additional parameters on top of the distance.
There are basically two standard ways in which
this may be done.
In Economics it is often considered that the
product's observed price primarily determines the
customer's choice. A notion of attraction in such a
setting is therefore fully price based. In the tradi-
tional mill pricing system the price actually paid
for the product is given at the facility, but the
customer should travel to the facility and its travel
cost, determined by the distance of travel, should
be included in the full observed price. Typically
this leads to additive attraction functions.
Apart from distance, one may consider the
price as just one of several ingredients in the
overall attraction process, in which other features
like ¯oor area, number of cashing counters,
product mix, publicity, etc. also play an important
role. All these properties (excluding distance) may
be summarized into a single measure for which the
unattractive word `attractiveness' has been used,
and which we prefer to simply call the quality. In
this context one usually ®nds proposals for multi-
plicative attraction functions. Note that this type of
attraction function has recently been criticized in
[16] since it might imply that a choice of facility
may change during the trip towards the facility.
2.3. Features of decision space
2.3.1. Location space
In competitive location models one ®nds back
the three traditional spatial settings of location
theory: discrete space, a network, and continuous
space. Observe that a complete description of
space should also include the distance measure
used.
In discrete space there are only a (relatively
small) ®nite list of candidate sites and the market is
always assumed to consist of point demand. Dis-
tances may then in principle be obtained in a very
precise way including all possible special features
necessary for an adequate description of reality.
Indeed the full set of demand-(candidate) facility
site pairs is fully known and ®nite. The central
diculty in practice resides in the amount of data
to be collected.
In network environment both demand and fa-
cilities may lie anywhere along the edges of the
network. The nodes of the network are just the
points where edges meet. Since travel is assumed to
be restricted to the network, distance is typically
calculated as shortest path distance. Location of
new facilities might be further restricted to only
part of the network, as de®ned by a set of edge-
segments.
It should be observed that the term network
location is often used in a more restrictive sense,
where only nodes of the network are candidate
sites. In our terminology such problems are con-
sidered as discrete problems, and the network
setting is only used in order to obtain a standard
way to calculate distances by shortest paths.
On the other hand theoretical developments in
network setting most often lead to the identi®ca-
tion (and ecient construction) of ®nite sets of
points which are guaranteed to contain at least one
or all optimal sites for the location problem at
hand. Such `localisation' theorems then allow to
reduce the original network location problem to a
discrete one by restricting the search for optimal
sites to this `®nite dominating set', thereby gener-
ating the situation described in previous para-
graph. Similar discretisation results often appear in
continuous setting too.
Continuous space refers to a locational space
determined by a coordinate system in which in
principle any real coordinate values are admissible.
One-dimensional space is equivalent to the sim-
plest possible network: a linear segment (or line), a
very popular setting for competitive equilibrium
studies in virtue of its simplicity. Other settings are
of course the geographical space modelled as a
two-dimensional plane or possibly a sphere. Ap-
plications in e.g., product positioning may involve
even higher dimensional settings.
In continuous space it is necessary to specify the
type of distance which is used. Classically this will
often be the euclidean distance, but many other
distance measures may be considered (see e.g.,
[54]), like `p …1 6 p 6 ‡ 1†, of which the rectan-
gular (or Manhattan) distance (p ˆ 1) and euclid-
ean distance (p ˆ 2) are special instances, or block
norms, obtained by shortest paths using only a
®nite set of travel directions and velocities ± and
 F. Plastria / European Journal of Operational Research 129 (2001) 461±470
even their asymmetric cousins block gauges ±
which usually lead to easily manageable linearity
properties.
2.3.2. Number of new facilities
The number of new facilities to locate strongly
in¯uences the diculty of the model. In static
models we simply distinguish between single and
multiple facility models. In models with foresight
and in equilibrium studies one also distinguishes
with respect to the number of (future) competing
facilities.
2.3.3. Facility design
The full question to be answered by the model
may involve more than the location. If the prod-
uct's price is not ®xed then the most favorable
price-setting might be looked for. Similarly the
model might be asked to determine the facility's
quality. In all such cases we will talk about location
and design of the facility.
2.3.4. Objective
The ®nal question to answer is which objective
is exactly pursued.
One of the main objectives studied involves
maximising the market share of the incoming
player. This is the total demand volume captured
by the new facilities. More precisely it is the sum
over all customers of the volume of their demand
which will be served by the new facility(ies).
More generally, this objective should be ex-
pressed as pro®t maximisation, allowing for the
introduction of costs next to the incomes reaved
from the market. This will be particularly neces-
sary in location-design models to adequately
measure the cost/bene®t trade-o€s in the design
choice.
Many other objectives may be considered, e.g.,
related to voting theory, but these would lead us
too far. One multiobjective approach has also been
attempted, see [42].
3. Static deterministic competitive facility location
The basic assumptions in this section are sum-
marised as follows:
465
· existing competition is known and ®xed,
· customers patronise the most attracting facility
with their full demand, i.e., `the winner gets it
all' principle.
3.1. Captured market
Let us ®rst take a look at how the demand of
the whole market is split over the di€erent com-
petitors, also called their market area. So for the
moment no location question is asked, but only
the allocation question is addressed.
This question has mainly been studied in a
continuous space, such as the plane. Since cus-
tomers patronise the most attracting facility, the
market area of a facility is determined as the set of
all demand points which feel most attracted to that
particular facility. When attraction is some con-
tinuous and strictly decreasing function of dis-
tance, and demand is supposed to be continuously
distributed, these market areas form a set of dis-
joint open regions, the closure of which usually
cover the whole space. The simplest and best
known example is the standard Voronoi diagram,
obtained with euclidean distance in the plane and a
same attraction function towards all facilities ±
for each facility its market share is the polygon
obtained by intersecting all the halfplanes of
points closer to it than to another competing fa-
cility. For other model-assumptions the shape of
the market shares may be quite complex with
highly nonlinear boundaries and several connected
components, see e.g., [7].
Such diagrams have been extensively studied,
both from their structural and their construction
point of view. For an overview of this type of
market area research see [36]. The wonderful book
[48] gives all details on applications and algorith-
mic construction of generalized Voronoi diagrams
in many ®elds. Applications to location questions
are detailed in [49]. Since such diagrams are geo-
metric objects, usually of low dimension (mostly
2), they are constructed with the tools of compu-
tational geometry; for an elementary construction
of the standard Voronoi diagram see [5], for an
interesting discussion of the relationship with
convex hulls and its algoritmic consequences see
466 F. Plastria / European Journal of Operational Research 129 (2001) 461±470
[44], and for an investigation of generalisations of
these approaches to other distance measures see
[43].
Voronoi diagrams on networks are studied in
[35]. They are constructed by an extension of the
traditional Dijkstra method for shortest paths.
In case of pointwise demand one may deter-
mine for each demand point what is the attraction
felt towards each existing facility. The maximum
value will be the current attraction this consumer
feels, which determines its current choice of facility
to patronise.
3.2. Pure location
The market captured by the new facilities con-
sists of that part of the demand for which its
current attraction is beaten by the attraction to the
new facility. Since attraction is an increasing
function of distance, this is equivalent to the dis-
tance between demand point and new facility be-
ing within some critical value, sometimes called the
break-even distance [12], which may be interpreted
as the distance a consumer is willing to travel for
the product or service at the new facility.
An important point is to know what happens in
the case of ties, i.e., when the new facility lies ex-
actly at the break-even distance from a demand
point.
In discrete setting this happens mainly when the
new facility site chosen coincides with some com-
peting facility. It is then customary to assume that
demand is evenly split between all the highest at-
tracting facilities. For technical reasons this is of-
ten simpli®ed into the rule that the existing
facility(ies) and the new facility(ies) obtain each as
a group half of the demand. This results in the
following discrete maximal capture problem, initi-
ated in [58].
X X wi
Max wi yi ‡ zi
i2I i2I
2
X of tie with a new facility, customers will go on
yi 6 xs …i 2 I†;
s2Pi
X before. This is the rule followed in [34] introducing
zi 6 xs …i 2 I†;
s2Ti
yi ‡ zi 6 1 …i 2 I†;
X
xs 6 p;
s2S
yi ; zi 2 ‰0; 1Š …i 2 I†;
xs 2 f0; 1g …s 2 S†;
where customer i 2 I has demand wi , Pi denotes the
set of sites s which i would patronise if a new fa-
cility would be opened there, while Ti is the set of
sites for i tied with the currently patronized com-
petitor's facility. The main decision variables are
the location variables xs answering the question
`will a facility be opened at s?' Auxiliary variables
are yi (`is i fully captured?') and zi (`is i tied with a
competitor?').
This leads to combinatorial optimisation mod-
els similar to covering, as exhaustively reviewed in
[61].
Discrete models without split demand lead to
the maximal covering type location model intro-
duced in [8] (see e.g., section 4.5 in [11]). This is a
simpli®ed version of the maximal capture problem
given above in which all tie sets Ti are empty, and
therefore without the auxiliary tie variables zi .
Typically these models will have many optimal
solutions, a feature which is troublesome for
standard exact search branch and bound methods,
but makes heuristic approaches particularly ap-
pealing. A recent proposal [6] for solving large-
scale models of this type consists of a Tabu search
method.
Since in network and continuous setting ties
appear whenever a site is chosen which is exactly at
break-even distance from the demand point, the
deterministic allocation rule inevitably leads to
discontinuity of the capture function at such
points, and previous rule of even split enhances
this. Without split one at least retains semi-conti-
nuity. Two extreme situations without split de-
mand may now be considered.
First there is convervatism, stating that in case
patronising the existing facility they patronised
the NP-hard …r; Xp †-medianoid problem: ®nd r
sites on a network maximising the total weight of
 F. Plastria / European Journal of Operational Research 129 (2001) 461±470
demand vertices lying closer (in terms of shortest
paths) to one of them than to any of the compet-
itors Xp .
Second, the opposite assumption of novelty
orientation, i.e., in case of tie the new facility gets
all demand [56], gives rise to closed captured
markets, a feature of particular importance in the
next section. With this tie-resolution rule there
corresponds to each demand point a (closed)
subset of the location space of all sites for the new
facility(ies) that would capture that demand. In
other words, we have a collection of subsets, each
related to a given demand volume. For a particular
site the total captured demand is then obtained by
summation of the volumes of all sets it lies in.
Maximising the captured demand now means
®nding (a point in) a nonvoid intersection of such
sets corresponding to the highest total volume. In
the euclidean plane these sets are circular balls and
it is easy to show that optimal solutions will always
exist among all intersection points of two of the
boundary circles, an easily enumerated ®nite set of
candidates. Drezner [17] shows how to do this ef-
®ciently for a single facility, while [45] suggest a
dynamic programming approach for the multifa-
cility version.
This type of model has also been advocated
in marketing studies for brand-positioning
[25,26,30,60] and even in political science (see
[60]). In the ®rst case product characteristics are
taken as coordinates in a feature space, demand
is represented by consumer groups having a
common ideal brand-description, and attraction
towards a brand is expressed by way of the
(euclidean) distance between the points repre-
senting the ideal and the real brand. This leads
to ball intersection problems in higher dimen-
sions which turn out to be NP-hard when di-
mension is part of the input [9], but polynomial
in ®xed dimension. Several solution approaches
have been developed recently, all relying on
geometric construction and evaluation of a ®nite
dominating set [2±4,9,10,37].
Continuously distributed demand has not
been studied much in this setting. The main
contribution at present seems to be [18] and
concerns the rather theoretical linear segment
market.
467
3.3. Location and design
The characteristics of the new facility are often
not ®xed in advance, and their choice may then be
incorporated into the decision process. Hence the
attraction towards the new facility can now be
in¯uenced both by location and by quality, and the
break-even distance becomes a function of the new
decision variable quality. A higher quality will in-
crease the captured market and hence income, but
at the expense of extra costs. Good solutions will
therefore have to balance both e€ects, which is
usually achieved by using some notion of total
pro®t as objective.
It turns out that such problems are only
mathematically well behaved when demand is as-
sumed to be novelty oriented. It was shown in
[56,57] that any other tie-resolution rule leads to
non-existence of optimal solutions: any solution
can be beaten by another solution suciently close
to a novelty-oriented optimal one.
When the quality is to be chosen from a discrete
set of available values, each value may be consid-
ered separately, the resulting subproblems solved
as pure location situations, and the endresults
compared to obtain an integrated decision.
When location of the new facility is ®xed only
quality is to be optimally determined, which is easy
in the deterministic behavioural model with point
demand, even when the quality has to be selected
from an interval of values: pro®t changes only at
particular threshold qualities, each corresponding
to capture of an additional demand point. There-
fore a ®nite solution method may consist in the
following steps:
1. for each demand point determine at which
threshold quality it starts to be captured by
the new facility,
2. sort the demand points for increasing threshold
quality,
3. calculate cumulatively in this order the corre-
sponding captured demand for each demand
point,
4. calculate the pro®t for each threshold quality
using captured demand,
5. select the quality yielding highest pro®t.
For a ®xed quality we have a pure location
problem, and the results of Section 3.2 show that
468 F. Plastria / European Journal of Operational Research 129 (2001) 461±470
we can then usually identify a ®nite dominating set
of candidate optimal sites. It turns out that this set
may often be chosen independently of the quality.
Therefore we have a ®nite set of candidate optimal
location/quality integrated decisions, even when
both location and quality are continuous vari-
ables. For planar setting, this property was ex-
ploited in [56] for multiplicative attraction
functions, and in [57] for general attraction func-
tions. Ecient methods of solution of computa-
tional geometry type are discussed in [55].
4. Static probabilistic competitive facility location
The basic assumptions in this section are sum-
marised as follows:
· existing competition is known and ®xed,
· customers patronise several facilities and split
their demand between them.
4.1. Pure location
4.1.1. The Hu€ model
Hu€ [40] introduced the idea to interpret at-
traction (up to that time expressed in terms of
distance only) not as something each consumer
maximises in its facility-choice, but rather as a
measure of patronising probability. Note that Hu€
considered cities instead of customers, in analogy
with the gravity models for economic interaction
that were fashionable at that time. Therefore he
also made use of a multiplicative attraction func-
tion in analogy with the gravitational law in
physics. This called for an analogy to mass, and
thereby Hu€ also introduced a concept of quality,
to him mainly the size of the facility, as given by
¯oor area. This was generalized in [31,47] to in-
clude other facility properties.
The market share of a single new facility x of
quality a P 0 is now the sum over all customers of
the expected value of the volume of their demand
served by this new facility:
X attr…i; x†
MS…a; x† :ˆ wi : P ;
attr…i; x† ‡ f 2CF attr…i; f †
i2I
where CF is the set of existing competing facilities,
and attr…i; x† (resp. attr…i; f †) denotes the attraction
felt by customer i towards facility x (resp. f). Re-
call that attraction is a decreasing function of
distance between customer site and facility, and
increases with quality a.
The resulting optimisation model in continuous
context lacks all of the usual convexity properties
needed for solvability by traditional methods. A
locally optimal location for a single facility may be
obtained by local search [13], while for a guaran-
teed globally optimal location one will have to rely
on global optimisation, e.g., the big square small
square method, as suggested in [53].
A corresponding multifacility location model is
even more complicated, investigation of which was
started anyway in [14], but remains, however,
virtually unsolved.
On networks the situation is often much easier.
Indeed, when attraction has the frequent form
a
attr…i; x† ˆ ;
c…dist…i; x††
where the (strictly positive) function of distance c
is concave increasing (both the subjective impres-
sion and the cost of distance usually have this
property), the objective is convex on each edge,
leading to a node-optimality property, [32,33,52].
In other words only nodes of the network (in-
cluding the demand points) should be inspected in
the search for optimal sites. Therefore the problem
reduces to a discrete case. For general attraction
functions which lack the previous property, how-
ever, no such discretization seems to be possible
and one has to rely on global optimisation tech-
niques ([51]).
Following up on the initial attempt [41], dis-
crete multifacility location models of this kind
have been at the heart of a lot of research in the
retail sector [1,27±29], usually proposing complete
enumeration schemes applicable to small scale
problems only.
4.1.2. The Pareto±Hu€ model
In Hu€'s original proposal any customer al-
ways patronises all facilities with non-zero
probability. Arguing that one may accept to
 F. Plastria / European Journal of Operational Research 129 (2001) 461±470
patronise a facility at a greater distance, but only
when it has higher quality, Peeters [50] intro-
duces the Pareto±Hu€ model. Here the proba-
bility interpretation of attraction is kept, but
attraction towards a facility drops to zero as
soon as some other facility with at least the same
quality lies closer.
It has been shown [50±52] that in network
context this model leads to discontinuities and
possible nonexistence of optimal solutions. How-
ever, when the attraction function involves a
concave function of distance, a ®nite set of points
can be determined close to which all -optimal
solutions lie. Therefore this set of points may be
considered as optimal for practical purposes.
4.2. Location and design
The question how to optimise both location and
quality of the new facilities in either Hu€ or Pa-
reto±Hu€ models has been looked at in discrete
location setting only, [20,59], where quality is
considered as a continuous decision variable. It
turns out that when attraction is an adequately
convex function of quality, optimal solutions exist
and may be calculated by solving a ®nite number of
one-dimensional convex minimisation problems.
Observe that since under reasonable technical
assumptions on the shape of the attraction
functions the Hu€ model allows for a ®nite
dominating set (node-optimality) for optimal lo-
cations which is independent of quality, this same
set acts also as a ®nite candidate location set for
the location and design question. This shows that
such network problems reduce to corresponding
discrete models.
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