MODULAR DESIGN OF HEAT EXCHANGER NETWORKS

In a competitive market the design and operating decisions of the competing firms influence their own and their competitors’ profitability. Game theory suggests ways in which the competitors’ intentions can be allowed for Its use is illustrated with reference to a simple chemical plant example.

In the first part of the paper the decision making problem for competing firms is cast into a Lagrange multiplier formulation for constrained optimization. This gives new insight into the conventional micro-economic formulations, enables more comprehensive results to be obtained for the Russell and Bogaert problem (1980) and resolves some apparent discrepancies. The treatment also illustrates how a two-level decision problem can be solved in a competitive environment where, as is very commonly found, design decisions are irrevocable once the plant has been built but operating conditions can be adjusted to match the current situation.

The second part of the paper treats the case in which the two participating firms agree to co-operate to their mutual benefit. However, the way in which the benefits of this co-operation are divided between the participants is determined by the pressure each can exert on the other by potentially threatening behaviour. Numerical results are presented for the earlier example for various scenarios and compared with the results obtained for purely competitive activity in the first part of the paper