The Simple Plant-Location Problem under Uncertainty

There is a class of simple plant-location problems under uncertainty that can be decomposed into two simpler problems that can be solved sequentially with surprising ease. The salient characteristic of this class of problems is that for any demand generating region, one plant dominates all others as a supply source. We develop and discuss the conditions required for this dominance. The risk-averse nature of the firm is incorporated into this model with a mean-variance formulation of the objective function. The general formulation is particularized to four paradigms of firms characterized by a range of behavioral and market assumptions.

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