A new approach to cooperative competition in facility location problems: Mathematical formulations and an approximation algorithm

This paper deals with cooperative competition in facility location problems in which potential players (investors) are in competition (or conflict) over acquiring suitable sites and clients. In order to formulate the problem, a game-theoretical multi-objective model with the objective of maximizing investor utility is presented. In the proposed method, an acceptance threshold constraint is applied to facility allocation that is based on a combination of distance between a facility and clients, and investors' product prices. Since the common solution methods for multi-objective optimization, such as weighted sums, ε-constraints, multi-objective meta-heuristic algorithms, etc. are not efficient enough, and cannot guarantee achieving Nash equilibrium points, a new approach is developed to solve the presented problem. Moreover, according to the computational complexity of the problem, an approximation algorithm is introduced for large-sized problems. Finally, the computational results demonstrate that the proposed algorithm performs efficiently in obtaining Nash equilibrium points.