Pooling problems under perfect and imperfect competition

TL;DR

This paper studies non-cooperative pooling problems where multiple players optimize their processing networks in competitive markets, introducing bilevel formulations and a novel decomposition algorithm to analyze strategic interactions.

Contribution

It presents new bilevel models and a decomposition algorithm for analyzing non-cooperative pooling problems in competitive settings.

Findings

Bilevel formulations effectively model strategic interactions.

The decomposition algorithm solves complex pooling problems efficiently.

Results highlight the impact of competition on processing network decisions.

Abstract

We investigate pooling problems in which multiple players vie with one another to maximize individual profit in a non-cooperative competitive market. This competitive setting is interesting and worthy of study because the majority of prevailing process systems engineering models largely overlook the non-cooperative strategies that exist in real-world markets. In this work, each player controls a processing network involving intermediate tanks (or pools) where raw materials are blended together before being further combined into final products. Each player then solves a pure or mixed-integer bilinear optimization problem whose profit is influenced by other players. We present several bilevel formulations and numerical results of a novel decomposition algorithm.