Dynamic Models: Equilibrium and Disequilibrium Approaches

In this chapter, we consider two different approaches to formulating multi-period, dynamic facility location models which are based on the construct of an economic equilibrium (or disequilibrium). Our dynamic models build on the single period location models presented in previous chapters, and represent a natural extension of those models. Plant facility location, almost by definition, implies a significant commitment on the part of a firm to a location for a period of years. Thus, the ability to explicitly evaluate the impact of a location decision over a multi-period (multi-year) planning horizon represents an important capability and enhancement. In particular, the multi-period planning horizon facilitates the evaluation of the proper timing of location decisions, in addition to the determination of the best location(s). Further, this allows the firm’s location decision to better meet forecast growth and/or decrease in market demand over time.