Competitive multi-facility location games with non-identical firms and convex traffic congestion costs

This paper studies a set of heterogenous competitive firms simultaneously locating facilities at a set of locations to serve a set of markets. Firms incur firm-specific transportation, congestion, and location costs, and market price is linear and decreasing in the amount shipped to the market by all firms. First, firms’ market-supply decisions for given facility locations are characterized using a variational inequality formulation. Then, firms’ location decisions are analyzed. A heuristic method is provided for finding equilibrium locations, and its computational efficiency is compared to a random search method.     

Reliable emergency service facility location under facility disruption,en-route congestion and in-facility queuing

The planning of emergency service facility location, especially for those expecting high demand and severe conditions, requires consideration of victims’ en-route travel, in-facility service quality, and reliability of these service facilities themselves. This paper first presents a scenario-based stochastic mixed-integer non-linear program (MINLP) model that integrates facility disruption risks, en-route traffic congestion and in-facility queuing delay into an integrated facility location problem. We derive lower and upper bounds to this highly complex problem by approximating the expected total system costs across the normal and all probabilistic facility disruption scenarios. This allows us to develop a more tractable approximate MINLP formulation and a Lagrangian Relaxation (LR) based solution approach. The relaxed sub-problem for location and service allocation decisions is further reformulated into a second-order conic program. Numerical experiments show that the approximate model and LR solution approach are capable of overcoming the computational difficulties associated with the problem. Interesting findings and managerial insights are obtained from a series of sensitivity analyses, e.g., regarding the importance of considering in-facility queuing in location design, and the significance of resource pooling on the optimal facility deployment.     

Locating manufacturing and distribution centers: An integrated supply chain-based spatial interaction approach

This study investigates the facility location problem of transnational personal computer (PC) manufacturing for the domestic market of China. An integrated supply chain-based spatial interaction model is formulated to determine facility locations of the transnational PC manufacturing centers and regional product distribution centers in China, with the goal of maximizing the potential rate of return on facility investment. The numerical results show that the Shanghai municipality is ranked highest for siting both the manufacturing and distribution centers for a transnational PC manufacturing enterprise.     

Airlines’ competition in aircraft size and service frequency in duopoly markets

We are interested in how airlines make decisions on aircraft size and service frequency in a competitive environment. We apply three game-theoretic models to analyze airlines’ choices in duopoly markets: one short-haul market and one long-haul market. We study how airlines’ choices in a competitive environment may vary with flight distance, and also do sensitivity analysis to explore how the equilibrium results may change when air travel demand is higher, as it may happen in the future.Our research considers the competition factor in airlines’ decisions on both aircraft size and service frequency, and the impact of these decisions on both the cost and demand sides of airlines’ business. Different from previous studies, our research is based on cost, market share and demand models derived from empirical studies.     

Designing a new supply chain for competition against an existing supply chain

We develop a bi-level model for designing an entrant supply chain (SC) in the presence of a pre-existing competing SC where demand is elastic with respect to price and distance. The model assumes dynamic competition between the new and pre-existing SCs in retailers’ level and probabilistic customers’ behavior. Strategic facility location and flow decisions are made while considering inventory carrying costs incurred on the operational level. We formulate the problem and propose exact and metaheuristic algorithms to solve it. The model is solved using data from a real-life case and also randomly generated test problems to extract managerial insights.     

A supply chain network design considering transportation cost discounts

This study addresses an integrated facility location and inventory allocation problem considering transportation cost discounts. Specifically, this article considers two types of transportation discounts simultaneously: quantity discounts for inbound transportation cost and distance discounts for outbound transportation cost. This study uses an approximation procedure to simplify DC distance calculation details, and develops an algorithm to solve the aforementioned supply chain management (SCM) problems using nonlinear optimization techniques. Numerical studies illustrate the solution procedures and the effects of the model parameters on the SCM decisions and total costs. Results of this study serve as a reference for business managers and administrators.     

Incorporating inventory control decisions into a strategic distribution network design model with stochastic demand

In this paper, we propose a simultaneous approach to incorporate inventory control decisions––such as economic order quantity and safety stock decisions––into typical facility location models, which are used to solve the distribution network design problem. A simultaneous model is developed considering a stochastic demand, modeling also the risk pooling phenomenon. We present a non-linear-mixed-integer model and a heuristic solution approach, based on Lagrangian relaxation and the sub-gradient method. In a numerical application, we found that the potential cost reduction, compared to the traditional approach, increases when the holding costs and/or the variability of demand are higher.     

Freeway traffic congestion in Riyadh, Saudi Arabia: attitudes and policy implications

The last few years have shown an unprecedented increase in traffic congestion in Riyadh, Saudi Arabia, especially on radial freeways. Unorganized distribution of land uses, inefficient traffic management, and low-cost automobile use have been major contributors to the problem. This article shows a strong awareness amongst drivers of the negative consequences of the congestion problem. Interviewees have strongly supported several land use, traffic management and transportation provision measures to alleviate freeway congestion but have strongly opposed increasing automobile travel costs. The study suggests an integrated approach to reduce the congestion problem through integrated policies for land use, economics and transportation.     

Do firms flee traffic congestion?

Much transport policy aims to use congestion relief measures to support economic activity, but planners know relatively little about how individual firms respond to traffic congestion. This study helps fill this gap by exploring individual firm location responses to traffic congestion within the Philadelphia metropolitan area between 2003 and 2007. This study tests whether existing, basic-industry firms flee congested areas to minimize exposure to the congestion externality. Relocation responses are estimated and compared for five separate industries (finance and insurance, health care, manufacturing, real estate and leasing, and wholesale trade) using firm-level data collected by InfoUSA and obtained from ESRI. Results suggest that congestion influences firm location decisions, but that the scale of congestion is important. While firms appear to relocate out of areas with high regionally-scaled congestion, areas with high local congestion are associated with a lower likelihood of relocating. In sum, while regional congestion appears to be a drag, local congestion appears to function as an amenity – implying that there is truth in the competing notions among engineers and economists of congestion as a diseconomy and among urban designers of congestion as an amenity.     

A location-inventory model for large three-level supply chains

We study the location-inventory problem in three-level supply networks. Our model integrates three decisions: the distribution centers location, flows allocation, and shipment sizes. We propose a nonlinear continuous formulation, including transportation, fixed, handling and holding costs, which decomposes into a closed-form equation and a linear program when the DC flows are fixed. We thus develop an iterative heuristic that estimates the DC flows a priori, solves the linear program, and then improves the DC flow estimations. Extensive numerical experiments show that the approach can design large supply networks both effectively and efficiently, and a case study is discussed.     

Informal transport: A global perspective

Informal transport services—paratransit-type services provided without official sanction—can often be difficult to rationalize from a public policy perspective. While these systems provide benefits including on-demand mobility for the transit-dependent, jobs for low-skilled workers, and service coverage in areas devoid of formal transit supply, they also have costs, such as increased traffic congestion, air and noise pollution, and traffic accidents. This article reviews the range of informal sector experiences worldwide, discusses the costs and benefits of the sector in general and uses several case studies to illustrate different policy approaches to regulating them.     

Optimising the container transhipment hub location in northern Europe

This paper applies a specific research methodology designed to evaluate and compare competing seaport locations within a given region as the optimal site for international container transhipment activity. The main focus is on container transhipment hub locations in northern Europe. Transhipment is the fastest growing segment of the containerport market, resulting in significant scope to develop new transhipment terminal capacity to cater for future expected traffic flows. Transport distances and associated shipping costs are calculated for existing hub locations and these are then compared with a new proposed transhipment location in the region, in this instance the vast natural deep-water harbour at Scapa Flow in the Orkney Islands. Findings from the research demonstrate that current container hub ports are not necessarily optimal (for serving transhipment markets), and that alternative port sites such as Scapa Flow could provide a superior and more competitive location from which to support the fast expanding transhipment markets of northern Europe.     

The competitive facility location problem under disruption risks

Two players sequentially locate a fixed number of facilities, competing to capture market share. Facilities face disruption risks, and each customer patronizes the nearest operational facility, regardless of who operates it. The problem therefore combines competitive location and location with disruptions. This combination has been absent from the literature. We model the problem as a Stackelberg game in which the leader locates facilities first, followed by the follower, and formulate the leader’s decision problem as a bilevel optimization problem. A variable neighborhood decomposition search heuristic which includes variable fixing and cut generation is developed. Computational results suggest that high quality solutions can be found quickly. Interesting managerial insights are drawn.     

Spillover effects of the development constraints in London Heathrow Airport

In this article we assess the growth impact of London Heathrow’s development constraints on other airports in the UK. To test the relationship we use a two-stage methodology yielding an estimate of a congestion spillover effect. Our data are passenger traffic from 1990 to 2012 containing both intercontinental and European air traffic. For intercontinental air traffic, our results show high congestion spillover effect between Heathrow and Gatwick airports, and significant but lesser effect to Stansted airport. We also find significant congestion spillover effects from Heathrow to the spatially more distant Manchester and Birmingham airports, showing the extensive spatial impact of Heathrow’s development constraints. For European air traffic, controlling for low-cost air carrier growth, only two airports show significant congestion spillover effects: Gatwick and London City Airports. Illustrating that low-cost carriers do not operate from Heathrow, so its limitations cannot affect the predominant low-cost air traffic in other airports. The novel methodology we present in this paper can be applied to congestion research in general to assess regional and modal spills within networks.     

A socio-economic assessment of proposed road user charging schemes in Copenhagen

Road pricing, congestion charging, toll-systems and other road charging instruments are intensively discussed in many countries. Although many partial analyses of the consequences have been published, few overall socio-economic analyses have been carried out. The article presents such a socio-economic analysis of four different proposed road pricing schemes for the Copenhagen area. The purpose was to assess all benefits and costs involved, including impacts on traffic and environment, maintenance and financing costs as well as tax distortion effects. It was concluded that the socio-economic surplus of the projects depends crucially on the congestion level. With the current traffic level, road pricing will not yet be socially expedient in Copenhagen. However, if the opening year is postponed to 2015, the two most favourable schemes will turn positive. The analyses also showed that the magnitude of demand response by introducing road pricing is likely to have significant impact on the project surplus. This is an important observation because most short-term driven traffic models will then underestimate the projected surplus. Finally, it was found that the degree to which benefits outweigh costs depends considerably on the use of revenue. Although it may contribute to decreasing road congestion, recycling all of the revenue back to the transport sector turned out to be inefficient and costly.     

Credit-based congestion pricing: A Dallas-Fort Worth application

Under a credit-based congestion pricing policy, net revenues are distributed uniformly among qualifying travelers, to partially offset toll payments. This work predicts the traffic impacts, air-quality changes, welfare effects, and system implementation costs of such a policy, as applied to the Dallas-Fort Worth (DFW) region of Texas. Joint destination-mode choice models were estimated and applied. The status quo and two marginal cost pricing (MCP) scenarios were simulated for the short and long terms, with full feedback of trip costs and times. Monetarized logsum differences suggest that marginal cost pricing of congested freeways in this urban region, followed by travel credit distribution to all workers, is welfare improving for the great majority of such travelers. Moreover, high levels of recurring congestion (V/C ratios exceeding 1.5) are predicted to practically disappear.     

Spatio-temporal patterns of subjectively reported congestion in Tel Aviv metropolitan area

Traffic congestion is still one of the major problems of urban transportation. It is the aggregate outcome of individual, subjective, decisions in a changing traffic environment.The individual’s decision making is affected, among other factors, by experience and direct information from the surrounding environment, or indirectly from the media. The subjective map created from this information provides the cognitive environment within which the driver makes decisions. This study examines the spatio-temporal changes in the subjective map of reported congestion as formed by radio broadcasts in the Tel Aviv metropolitan area. It aims to evaluate the spatio-temporal stability of the emerged congestion patterns as a basis for subjective decision making, and to explain its variability as a necessary base for any effort to relieve congestion. Results show that non-recurrent heavy congestion is likely to be unstable. The spatio-temporal fluctuations of congestion were found to associate with traffic volumes caused mainly by weekly-based commuters which include university students, soldiers, and government employees. Reported information was found suitable for longitudinal research, the only kind which enables a broad understanding of the spatio-temporal pattern and dynamics of traffic congestion.     

Congestion,port expansion and spatial competition for US container imports

The purpose of this paper is to analyze spatial competition, congestion and flows of container imports into the United States. An intermodal network flow model is developed and used to analyze congestion in the logistics system for container imports. The results indicate that congestion exists at most ports and its consequences are to raise costs at these nodes, and in some cases to divert traffic to other routes. Finally, if each of the ports expanded, the value of marginal capacity would converge to nil, and expansion would reduce congestion costs and waiting times.     

Warehouse location choice: A case study in Los Angeles,CA

The purpose of this research is to understand how and why warehouses have changed location over time from central urban areas to the urban periphery: spatial decentralization. Over the last decade, the logistics industry has been restructured to transport large volumes of goods more quickly and reliably. Concurrently, the warehousing industry experienced changes in facility size and location: large warehouses have been built on the urban outskirts. This spatial shift is attributed to inventory and transport cost trade-offs: the gains from lower land prices and scale operation outweigh the increase in transport costs as warehouses decentralized from central urban areas. As a case study, I examine location choices of 5364 warehousing facilities in Los Angeles, CA. I hypothesize that (a) the location choice varies by facility size and (b) the location choice logic has changed over time. Results suggest significant differences in the effect of location choice factors over facility size and over time. For warehouses built before 1980, the most influential factors are local market, labor, and seaport/intermodal terminal proximity. In contrast, for warehouses built after 2000, lower land price and airport/intermodal terminal proximity have the greatest effects.     

Tradable credit schemes for managing bottleneck congestion and modal split with heterogeneous users

This paper examines the efficiency of a tradable travel credit scheme for managing bottleneck congestion and modal split in a competitive highway/transit network with continuous heterogeneity in the individuals’ value of time. Each user is initially endowed with a certain amount of travel credits and can sell or buy additional credits in a free trading market. Time-dependent credit charge is implemented only for usage of the road bottleneck. We show that both the modal split and credit charge at equilibrium are unique, and the scheme is always Pareto-improving when the system optimum is achieved.