Decision model for planning of regional industrial programs

Abstract

There is a significant worldwide trend for countries to participate in economic integration schemes on a regional basis for the planning of industrial development programs. These regional industrial programs are characterized by plant allocation decisions coupled with cost/benefit distribution decisions. The research work described in this paper addresses these issues by combining the traditional mathematical programming approach for determining plant location, size, timing, with a game theoretic approach for determining a reasonable distribution of costs and benefits among the members of a collectivity. Afte; developing the necessary theoretical framework by introducing and evaluating the properties of certain new concepts such as the Sharing Mechanism and the Durable Bargaining Equilibrium, they are illustrated through a real-life application to the planning of the petrochemical industry in a regional integration scheme. The theoretical results of this research can be applied to a wide range of situations involving multiple parties where the incentive for cooperation is present and yet the elements of self-interest bring in the possibility of conflict.