A global optimization approach to resource allocation problems with consideration of economies of scale

Economies of scale in allocation decisions have a significant impact in many resource allocation problems. However, the inclusion of economies of scale in a resource allocation problem results in a mathematical problem which is very difficult to solve numerically. In this paper we propose a global optimization approach based on a sequential outer approximation method to solve this type of problem. This approach is easy to implement and results in a global optimal solution to the original problem. A simplified land allocation problem with consideration of economies of scale is solved with the proposed approach as an example of application.