Facility Location under Zone Pricing

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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.

, 30 pages

This cahier was revised in May 1996