Stochastic Production/Location Models on a Line

Abstract

Because of the extensive investment in plant and equipment, the impacts of plant design and location decisions extend over a period of time. Consequently, many parameters in the problem are not known with certainty at the time the decisions must be made; they must be treated as being uncertain or random. In addition, some of the productive inputs are actually “stock” inputs (e.g., buildings and some equipment) which provide services over time rather than “flow” inputs (e.g., fuel, raw materials). This situation calls for a production/investment/location model that incorporates the uncertainty inevitable in decisions over time. Because of its complexity, however, a complete dynamic model of production/investment/location decisions under uncertainty has not been developed or analyzed, as yet, in the research literature. In this chapter we take the next step toward this general model by incorporating parametric uncertainty into production/location models on a line.