Benefit Maximizing Network Design in the public sector

This paper introduces the Benefit Maximization Network Design Problem (BNDP), an innovative framework aimed at optimizing public service systems. By integrating consumer choice models with a focus on minimizing consumer disutility, the BNDP strategically maximizes societal welfare by optimizing the net benefits derived from service utilization, carefully weighing the costs of service capacity against the value delivered to the public. An essential aspect of this study is the development of an $ϵ$-optimal solution approach, which effectively addresses the intricate optimization challenges inherent in public service system design, including nonlinear equilibrium conditions. This approach efficiently identifies the optimal number, locations, and capacities for service facilities, ensuring practical and effective solutions despite the model’s complexity. A practical application of the BNDP is demonstrated through a detailed case study on preventive healthcare in San Diego, showcasing the model’s ability to refine operational solutions and significantly enhance societal benefits. The results underscore the importance of prioritizing benefit maximization over simplistic capacity thresholds and participation maximization, leading to either higher levels of consumer participation while using optimal levels of resources or comparable levels of customer participation with significantly fewer resources and reasonable utilization rates. Furthermore, the paper explores the model’s applicability in the private sector to maximize corporate profits, highlighting its versatility. The study concludes by advocating for policymakers to prioritize the use of BNDP in establishing optimal budgets for public agencies rather than allocating resources based on exogenous capacities.