Service expansion for chained business facilities under congestion and market competition

We study a service expansion problem for chained business facilities under endogenic facility congestion and exogenous market competition. More specifically, we consider a company that operates a chain of facilities and plans to expand service capacities with the objective of maximizing its profit,...

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Main Authors: Lin, Yun Hui, Tian, Qingyun, Liu, Shaojun
Other Authors: School of Civil and Environmental Engineering
Format: Article
Language:English
Published: 2023
Subjects:
Online Access:https://hdl.handle.net/10356/169054
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-1690542023-06-27T08:17:11Z Service expansion for chained business facilities under congestion and market competition Lin, Yun Hui Tian, Qingyun Liu, Shaojun School of Civil and Environmental Engineering Engineering::Civil engineering Engineering::Computer science and engineering Chained Business Operations Service Expansion We study a service expansion problem for chained business facilities under endogenic facility congestion and exogenous market competition. More specifically, we consider a company that operates a chain of facilities and plans to expand service capacities with the objective of maximizing its profit, accounting for revenue and expansion costs. To estimate revenue, the company needs to anticipate customer behaviors. Due to the co-existence of competition and congestion, customer behaviors are explained as a two-stage process. In the first stage, customers make “channel” choices, i.e., they decide whether to seek services from the company. Such a choice reflects the market competition and is predicted by a discrete choice model. Subsequently, customers who select the company will choose one facility to patronize. Owing to congestion, the facility choice will induce “user equilibrium”, which in return affects the outcome of market competition. To facilitate the company's decision-making in this complex business environment, we develop a generic modeling framework. Unfortunately, the proposed model is nonconvex. To solve it, we first design an approximate mixed-integer linear programming approach subject to adjustable approximation errors. We then propose a surrogate optimization framework for large-scale instances, which explores the hidden bilevel structure of the model and leverages a “learning-to-optimize” problem and a customer behavior estimation subroutine. Using extensive computational experiments, we demonstrate the effectiveness of the proposed approaches. Finally, we conduct sensitivity analysis and draw practical implications. 2023-06-27T08:17:11Z 2023-06-27T08:17:11Z 2023 Journal Article Lin, Y. H., Tian, Q. & Liu, S. (2023). Service expansion for chained business facilities under congestion and market competition. Computers and Operations Research, 153, 106175-. https://dx.doi.org/10.1016/j.cor.2023.106175 0305-0548 https://hdl.handle.net/10356/169054 10.1016/j.cor.2023.106175 2-s2.0-85147538933 153 106175 en Computers and Operations Research © 2023 Elsevier Ltd. All rights reserved.
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic Engineering::Civil engineering
Engineering::Computer science and engineering
Chained Business Operations
Service Expansion
spellingShingle Engineering::Civil engineering
Engineering::Computer science and engineering
Chained Business Operations
Service Expansion
Lin, Yun Hui
Tian, Qingyun
Liu, Shaojun
Service expansion for chained business facilities under congestion and market competition
description We study a service expansion problem for chained business facilities under endogenic facility congestion and exogenous market competition. More specifically, we consider a company that operates a chain of facilities and plans to expand service capacities with the objective of maximizing its profit, accounting for revenue and expansion costs. To estimate revenue, the company needs to anticipate customer behaviors. Due to the co-existence of competition and congestion, customer behaviors are explained as a two-stage process. In the first stage, customers make “channel” choices, i.e., they decide whether to seek services from the company. Such a choice reflects the market competition and is predicted by a discrete choice model. Subsequently, customers who select the company will choose one facility to patronize. Owing to congestion, the facility choice will induce “user equilibrium”, which in return affects the outcome of market competition. To facilitate the company's decision-making in this complex business environment, we develop a generic modeling framework. Unfortunately, the proposed model is nonconvex. To solve it, we first design an approximate mixed-integer linear programming approach subject to adjustable approximation errors. We then propose a surrogate optimization framework for large-scale instances, which explores the hidden bilevel structure of the model and leverages a “learning-to-optimize” problem and a customer behavior estimation subroutine. Using extensive computational experiments, we demonstrate the effectiveness of the proposed approaches. Finally, we conduct sensitivity analysis and draw practical implications.
author2 School of Civil and Environmental Engineering
author_facet School of Civil and Environmental Engineering
Lin, Yun Hui
Tian, Qingyun
Liu, Shaojun
format Article
author Lin, Yun Hui
Tian, Qingyun
Liu, Shaojun
author_sort Lin, Yun Hui
title Service expansion for chained business facilities under congestion and market competition
title_short Service expansion for chained business facilities under congestion and market competition
title_full Service expansion for chained business facilities under congestion and market competition
title_fullStr Service expansion for chained business facilities under congestion and market competition
title_full_unstemmed Service expansion for chained business facilities under congestion and market competition
title_sort service expansion for chained business facilities under congestion and market competition
publishDate 2023
url https://hdl.handle.net/10356/169054
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