A combined cluster and interaction model: The hierarchical assignment problem

This article presents a new spatial modeling approach that deals with interactions between individual geographic entities. The developed model represents a generalization of the transportation problem and the classical assignment problem and is termed the hierarchical assignment problem (HAP). The HAP optimizes the spatial flow pattern between individual origin and destination locations, given that some grouping, or aggregation of individual origins and destinations is permitted to occur. The level of aggregation is user specified, and the aggregation step is endogenous to the model itself. This allows for the direct accounting of aggregation costs in pursuit of optimal problem solutions. The HAP is formulated and solved with several sample data sets using commercial optimization software. Trials illustrate how HAP solutions respond to changes in levels of aggregation, as well as reveal the diverse network designs and allocation schemes obtainable with the HAP. Connections between the HAP and the literature on the p-median problem, cluster analysis, and hub-and-spoke networks are discussed and suggestions for future research are made.