Promoting Regional Economic Welfare for Microstores via Nearshoring Strategies

Microstores contribute to the economic welfare of the specific regions where they are positioned. Due to this fact, the government must seek economic and social programs to promote them. In this paper, we study a problem that aims to enhance the microstores’ welfare through government intervention. We consider a government authority implementing nearshoring strategies by opening community stores to shorten supply times for microstores, thereby aiding their economy. On the other hand, microstore owners decide whether to source their products from the community stores or wholesalers. Due to the inherent hierarchy among decision-makers, a bilevel optimization framework is used to model the problem. Because of the specific characteristics of the bilevel problem, it can be reformulated as an equivalent single-level mixed-integer problem. This solution methodology is employed to address a case study from the city of Pachuca, Hidalgo, Mexico. The applicability of our approach is validated through computational experimentation. Additionally, a sensitivity analysis is conducted to provide interesting managerial insights.