Zone pricing consists in determining simultaneously several delivered prices together with the zones where they are applied. A model and algorithm are proposed to determine optimal facility locations, prices, tariff-zones, and market areas in order to maximize the firm's profit under zone pricing. The resulting nonlinear mixed-integer program is tackled by projecting the objective function on the price space, solving repeatedly uncapacitated facility location problems for fixed values of the prices. The implicit profit function so-defined is optimized by branch-and-bound. Computational results are reported.
Published July 1992 , 30 pages
This cahier was revised in May 1996