Journal of the Operational Research Society (2009) 60, 895 --905

2009

Operational Research Society Ltd. All rights reserved. 0160-5682/09 www.palgrave-journals.com/jors/

A deterministic linear optimization model for allocating schools to zones

I Gac1 , F Martnez2 and A Weintraub1
1 Department of Industrial Engineering, University of Chile, Santiago, Chile; and 2 Department of Civil Engineering, University of Chile, Santiago, Chile

This paper presents a deterministic linear optimization model to support decisions on optimal allocation of schools to zones, its characterization and assignment of students, maximizing the social benets of school owners and students. Students are assumed to show a multi-attribute behaviour, considering as important not only location, as is usual in the literature, but also quality of education and infrastructure, school costs and other attributes. There is heterogeneity of supply and demand. Students are classied by place of residence and socio-economic characteristics. Schools can be private, subsidized or free municipal ones. The model developed is applied to data of one of the municipalities of Santiago. The results obtained under different scenarios tend to conrm the expected demands behaviour. This model could be used to guide decisions of both school owners or municipalities as well as students towards an equilibrium closer to a social optimum.
Journal of the Operational Research Society (2009) 60, 895 905. doi:10.1057/palgrave.jors.2602630 Published online 25 June 2008 Keywords: location; education; urban studies; utility maximization; behaviour

1. Introduction
In Santiago (Chile) there are currently about 2000 schools, attended by more than 1.2 million students enrolled at the elementary and secondary levels. An analysis of the location of educational establishments and the supply of places in relation to the school-age resident population in each municipality making up the city shows that in certain sectors there is a signicant surplus of schools while in others there is a considerable decit. The problem is evident in Santiagos Urban Transportation Plan, which clearly reveals how the majority of schools are concentrated in a few of the citys municipalities, and even those municipalities that have a sufcient supply of places are unable to retain their students. In this context, daily access to educational institutions is an important factor in generating intra-urban travel given the volume of people involved and the distances between their residences and the institutions they frequent. In 1998, the cost of trips to and from schools was the equivalent of 33% of the Ministry of Educations spending on regular subsidies disbursed to educational establishments in Greater Santiago, not counting the associated costs of trafc congestion and pollution that are particularly signicant in this city. This above-described situation may be explained by various factors that combine to generate the current school location and attendance patterns. To begin with, the educational system is relatively decentralized and decisions regarding
Correspondence: I Gac, Department of Industrial Engineering, University of Chile, Republica 701, Santiago, Chile. E-mail: igac@ing.uchile.cl

management and particularly location are the responsibility of the local municipalities and private agents. Second, the supply of education is heterogeneous, with three different classes of establishments: private schools, (partially) subsidized schools and fully subsidized (free) municipal schools. The three institutional categories may also be differentiated by the amount of fees charged, academic performance, quality and quantity of infrastructure, etc. Parents are free to choose which school they enroll their children in. Thus, there are no restrictions limiting the choice of school to a childs municipality of residence and students may travel whatever distance is necessary to attend a school with the desired characteristics. In this paper, we present a model reecting the foregoing conditions whose objective is to determine the optimal allocation of different types of schools to zones and simultaneously assign students classied by socio-economic category to these institutions in such a manner as to maximize the social benets of the educational system. Existing models of optimal facility location and user assignment as applied to the problem of locating public services such as hospitals and schools, employ basic approaches that minimize user travel distances (the p-median approach) or maximize coverage. These formulations involve restrictive assumptions compared to real-world behaviour in that they consider no characteristics other than transportation cost. Such is the case with the studies by Pizzolato et al (1997, 2004). which use capacitated and non-capacitated p-median problems to determine the optimal location of public schools in Brazilian cities. The same method is utilized in a study

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conducted by Photis and Koutsopoulos (2003) in Greece, who apply a p-median model in the development of a system for supporting decision-making in educational infrastructure location. In a paper on locating educational infrastructure in urban localities in the Buenos Aires region, Cohen et al (2003) built a (linear) model that minimizes the total cost of the system, including transportation costs, incurred by consumers. In these previous studies, the authors assume that users attend the closest or lowest-cost institution. Similarly, Marianov and Taborga (2001) approach the problem of optimally locating public and private health services on the assumption that users patronize the closest facility. Given the current literature, then, one of the contributions of the model presented here is the development and incorporation of an objective function that measures the benets accruing to suppliers and demanders. It will be assumed that the benets obtained by students depend on quality of service characteristics beyond mere travel time and cost, an approach more closely mirroring the reality in which students and their families choose among a heterogeneous set of schools and municipality locations, not necessarily opting for the closest one. Thus, we drop the simplifying assumptions adopted in other models regarding homogeneity of facilities and the choice of the closest alternative. The proposed model determines a social optimum based simultaneously on consumer benets and supplier prot. Although it clearly does not generate an equilibrium solution, it can nevertheless be useful in supporting decision-making by government organizations seeking to move closer to the socially optimum equilibrium through subsidies, infrastructure, investments and location restrictions.

The price each type of school may charge is dened as the parameter pk jl whose value varies according to a subindex l for a school of type k in zone j. The subindex l allows a school to choose a fee level from among the various optional and discrete price levels that are dened as the models input parameter vector. By enlarging the number of price levels, the model may become approximate to a continuous price case. The decision variables consist of the following: nehi : proportion of type h students who reside in i and attend a type k school in zone j with fees at price level k jlm l, using transportation mode m; nehi [0, 1]. ne k jlm = k jlm (nehi , h, i) NCk jl : number of type k schools with price level l allocated in zone j. 1, if at least one type k school is allocated x k jl = in zone j with price level l 0, otherwise
k jlm

2.1. The objective function

The purpose of the model is to maximize social benets subject to constraints inherent in the agents and the system. The objective function to be maximized determines the social benets, which are modelled as an aggregate quantity and measure the aggregate consumer surplus plus the economic prot obtained by the various types of suppliers. Thus, Max B.S. =
h,i,k, j,l,m

CShi (nehi Nhi ) +

k, j,l k jl k jlm

k jlm

k jlm

(ne

, NCk jl )

(1)

where

2. Description of the model

To describe and model the educational system under study, we assume a discrete space containing zones identied by the index i I and a population of students classied in clusters h H according to their socio-economic level. The educational establishments are grouped in discrete alternatives identied by type k K and price level l L. One of the characteristics used to classify schools is their administrative status, which denes the amount of government subsidy they are eligible for. Private schools are administered by private agents and nanced exclusively by student fees; subsidized schools are also administered privately but receive a state subsidy that partially covers fee charges; and municipal schools are free, ran by local governments and nanced entirely by government funds consisting of a fee subsidy as with subsidized schools plus an operating budget B that cannot be exceeded. Thus, supply can be partitioned by dening three subsets K P , K S , K G that, respectively, denote private, subsidized and municipal schools. This array of school classes captures the current situation in Chile while being sufciently diverse to cover a wide range of other cases.

CShi is the individual surplus obtained by a type h student who resides in i and whose choice of school and transportation mode is identied by (k, j, l, m). Nhi is the number of type h students who reside in zone k jlm i, so that (nehi Nhi ) is then the total number of type h students who reside in i and whose choice of school and transportation mode is identied by (k, j, l, m) k jl (ne k jlm , NCk jl ) is the economic prot derived by schools identied by the choice alternative (k, j, l), and depends on how many students are enrolled and the number of schools of this type that will be allocated. As will be explained later, the schools prot is modelled as income (ie, revenues) less operating costs and required investment. Note that in Equation (1), the municipal schools prot is included as well as that of the privately administered (fully fee-paying and subsidized) schools. This implies that municipal schools compete in the market with the other two classes and can derive positive prot despite not charging fees if the subsidies received exceed the cost of providing the service. Note also that total benets are obtained by simple aggregation of the benets received by each consumer and supplier,

k jlm

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implying that each agents benets are of equal value to society. The model can, however, be extended by incorporating weights into each term in Equation (1) that assign differential valuations reecting a given planning objective. 2.1.1. Consumer surplus Since an individuals utility cannot be measured directly either in absolute terms or in units comparable to a suppliers prot, we have resorted to an alternative but nevertheless equivalent approach in which rational consumer behaviour is expressed as the maximization of consumer surplus, the latter dened as the difference between price and willingness to pay. The consumer evaluates this quantity for each possible alternative, choosing the one that yields a maximum (Martnez, 2002). This tech nique, commonly employed in urban economics, enables us to measure all the terms in Equation (1) in monetary units so that they are mutually comparable. According to Rosen (1974), the willingness-to-pay function WP can be dened as price expressed in terms of the inverse of the indirect utility function conditional upon the choice of school (assuming the inverse exists). In the present case, we use the inverse of the indirect utility function in price and cost k jlm of transportation. Also, assuming that utility Vhi is quasilinear and given that only one school is chosen, the indirect utility function is separable in income and price and takes the following form: Vhi where > 0 is the marginal utility of income. It indicates the importance of the income constraint in the level of utility, which is expected to be different for each socio-economic group h. N n f h (z k jm ) = n=1 n g(z k jm ) is a function that reects the h utility derived by a type h student upon choosing a school and transportation mode identied as alternative (k, j, m), based exclusively on its qualities vector z k jm , which does not include price and which we assume to be linear. n h represents the marginal utility, differentiated by group h, of the various attributes identied by the subindex n, and n g(z k jm ) is a transformation function of those attributes. Ih is the total income of a type h family group pk jl + ci jm is the total cost incurred by a student for alternative (k, j, l, m), which is given by school price pk jl plus the generalized transportation cost ci jm , the latter equal to the fare plus a value for the travel time involved in going from i to j using transportation mode m. From expression (2) we may write the total cost faced by a user as follows: pki jlm = pk jl + ci jm = Ih + f h (z k jm ) Vhi
0 h k jlm 0 h k jlm

where pki jl is thus interpreted as the maximum value a type (h, i) person is willing to pay for alternative (k, j, m) in k jlm order to attain utility level Vhi . In other words, Equation (3) denes the willingness-to-pay function WP conditional on the level of utility given the price pk jl and attributes z k jm . An equilibrium condition commonly utilized in urban economics and applicable to the present context requires that identical consumers attain the same level of utility. If this were not the case, those whose utility was lower would have an incentive to change their choice. Thus, we impose k jlm the condition Vhi = Vhi , k, j, m so the willingness-to-pay function can then be written as
0 WPhi (z, Vhi ) = Ih + 0 f h (z) Vhi 0 h

(4)

= Vh (Ih , pk jl , ci jm , z k jm ) = + f h (z k jm )

0 h (Ih

pk jl ci jm ) (2)

which expresses the willingness to pay of a student of type h who resides in i for attending school and use transportation mode alternative (k, j, m), whose attributes are given by vector z k jm . This willingness to pay is conditional on the 0 consumer reaching utility level Vhi . Paying a lower price will generate a monetary surplus directly related to the increment in utility obtained. Note that when the monetary surplus is maximized, the solution is independent of the level of utility 0 Vhi , which is an innocuous parameter in the optimization because the absolute value of consumer surplus does depend on this reference parameter. Note also that from Equation (4) we observe that as a consequence of the utility functions quasi-linearity assumption, willingness to pay for a given k jm alternative WPhi is also a linear function both in household income and in utility level. To measure the benets perceived by students in monetary units we resort to the concept of compensating variation (Varian, 1992), dened as the difference between willingness to pay WP and the price paid for an alternative. Thus, consumers surplus is given by CShi
k jlm

= WPhi (z k jm ) ( pk jl + ci jm )

k jm

(5)

Substituting Equation (4) into Equation (5) yields CShi

k jlm

= Ih +

0 f h (z k jm ) Vhi 0 h

( pk jl + ci jm )

(6)

Thus, the consumer behaviour is modelled by maximizing the consumer surplus that he/she would obtain by choosing the alternatives identied by indices (k, l, j, m). 2.1.2. Supplier prot The schools economic prot is dened as income given demand and price, plus subsidies received less associated costs. The latter are modelled as a management cost per student CGk plus an additional amount for infrastructure made up of required investment and maintenance costs. Thus, CInfk j = CInvk j + CMk j . Prot for each

(3)

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class of school can then be expressed as

k jl k jlm

(ne

, NCk jl ) = ( pk jl + tk CGk )
h,i,m

(nehi Nhi ) (7)

k jlm

(c) School capacity. Two constraints are dened for this concept: (c.i)
h,i,m

CInfk j NC where

k jl

(nehi Nhi ) (nehi Nhi )

h,i,m k jlm

k jlm

CapSupk j NCk jl , CapInfk j NCk jl ,

k, j, l k, j, l

(c.ii)

tk is an exogenous parameter representing the subsidy per student paid by the government. Since private schools receive no subsidy, tk = 0 k K P . pk jl is a parameter indicating the price charged by the schools. Since the municipal institutions are free, pk jl = 0 for k K G . Substituting Equations (5) and (7) into Equation (1) we obtain the following expression for social benets: B.S. =
h,i,k, j,l,m

(WPhi (z k jm ) ci jm + tk CGk )(nehi Nhi )

k, j,l

k jm

k jlm

CInfk j NCk jl

(8)

Thus, the objective function is linear in the optimization varik jlm ables nehi and NCk jl . Note also that price disappears from the social benets expression because there is a transfer of benets from the demand side to the supply side. Given that agent benets are identically valued by society, the model is indifferent to the transfer.

Constraint (c.i) establishes that the number of students attending type (k, l) schools in zone j should not be higher than the available capacity supplied, which is given by the maximum capacity of a school of type k (CapSupk ) multiplied by the number of schools of this class that are actually allocated. On the other hand, constraint (c.ii) imposes the condition that the number of students attending type (k, l) schools in j must be greater than a certain minimum number of enrollments (CapInfk ) for a school of this type to be willing to participate in supply. These two constraints are dened in terms of aggregate capacity for the total number of establishments located, since all schools of a given type k are homogenous within their subset and the model does not differentiate between them when assigning students. (d) Positive economic surplus. (d.i)
k jl

= ( pk jl + tk CGk )
h,i,m

(nehi Nhi ) k K P K S , j, l 0,

k jlm

CInfk j NCk jl (d.ii) (tk CGk )

h,i,m k jlm

0,

2.2. The constraints

The constraints that dene the feasible solution space are given below. (a) Total demand coverage. This constraint establishes that all students must attend a school, and is written as follows: nehi
k, j,l,m k jlm

(nehi Nhi ) CMk j NCk jl + B

k K G , j, l Constraint (d.i) establishes that private and subsidized schools must obtain a positive economic surplus, failing this they would not open or would close down in the short run. Constraint (d.ii) requires that the municipal schools be nancially viable, meaning that they must not spend on infrastructure, management and maintenance more than what they receive in subsidies and budget funding B. Note that this latter constraint does not require that the municipal schools cover the cost of infrastructure investment CInvk j . Note also that subsidies are allowed to exhaust the government budget B, without any premium in the objective function for less spending. This criterion is analysed later as an scenario. (e) Single price level. (e.i.)
l

= 1,

h, i

(b) Ability to pay and feasibility to attend. This constraint ensures that consumers comply with their income constraint, and that students cannot attend a school that is not supplied. It is dened as follows: nehi
k jlm

shi NCk jl , =

k jlm

h, i, k, j, l, m
h

shi

k jlm

1, if pk jl + ci jm 0, otherwise
k jlm shi

Ih

x k jl = 1, M x k jl ,

k, j k, j, l

where the parameter may take the values 1 or 0 according to whether or not the budget constraint pk jl + ci jm h Ih is satised, where h [0, 1]h is an exogenous parameter representing the maximum share of income devoted to education. Also, if NCk jl is 0, k jlm nehi will also be 0, expressing the second condition.

(e.ii) NCk jl

Constraint (e.i) establishes that each school of a given type k that is allocated in zone j must set one single price level, on the assumption that market competition

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would ensure that an identical product would fetch a single equilibrium price. Of course, the optimum may not necessarily comply with this condition, but allowing price variability within options in a zone and the same school type would lead to highly unstable solution; hence we consider what may be dened a second best that is easier to implement. Constraint (e.ii) indicates that if no schools of type (k, j, l) are opened, so that (x k jl = 0), the number of schools variable for this class must be 0. On the other hand, if x k jl = 1 (ie, if at least one school of type k in j with price level l is opened), the number of schools is bounded by an auxiliary parameter M that can be dened, for example, as equal to the maximum number of schools necessary to satisfy total demand. The model has no constraints on the assignment of students to schools within or near their zone of residence, nor on the maximum price private schools may charge, as no such restrictions apply to the education system under study here. There does exist, on the other hand, a restriction relating to the maximum price for subsidized schools, which is incorporated directly in pk jl when values are assigned to this parameter for such institutions.

Figure 1

Map of the municipality within Santiago.

3. Application of the model

The model is applied to four scenarios. The rst three incorporate different behavioural assumptions for supply and demand, while the fourth tests a modication of the objective function in which the prot of municipal schools is eliminated and government spending is included as a social cost. The latter factor reects the fact that government resources have alternative uses not taken into account in the model given that our focus is conned to the education sector of the economy.

A further assumption made was that each school of type k could be approximately described by a vector of discrete attributes indicating a number of different classes of schools. The attributes and values included are as follows: Level of subsidy (k): private, subsidized or municipal (k {K P , K S , K G }). Capacity (C): high or low (C {CH , CL }). Academic quality (Q): high or low (Q {Q H , Q L }). This is measured by the results of standardized national academic tests. Infrastructure quality (I ): good or bad (I {IG, IB }). On the basis of these values and attributes, 17 types of schools were predened. Of these, eight types were private and another eight subsidized. Only one type of municipal school was included, a high-capacity institution with low academic results and bad infrastructure represented in our notation as (K G , CH , Q L , IB ). This reects the assumption that it would make no sense for government agents such as municipalities to maintain either small schools, thus neglecting economies of scale, or schools with different infrastructures and results, given that they are prohibited from discriminating among students and that their budgets do not allow for better infrastructure. As regards their academic quality, it was dened here as low because historically such schools in the area under study here have been so characterized. The investment cost CInvk j associated with each type of school in each zone was modelled as a function of the persquare-metre land values and construction costs involved. Maintenance costs CMk j were taken to be a percentage of

3.1. General description of the scenarios

To apply the model a base scenario was created using existing information for one municipality in the city of Santiago supplemented by reasonable assumptions where data were not available. Further assumptions were added to represent the behaviour of students and school owners, thus arriving at the three scenarios described below. This method should ensure that the scenarios are realistic, and it is hoped that the solutions they generate can be interpreted intuitively. The municipality was divided into six zones, i, j {1, 2, 3, 4, 5, 6}, and it was assumed that the population could be classied according to socio-economic criteria into ve groups h {1, 2, 3, 4, 5}. It was also assumed that the groups differ primarily in income level, preferences for type of school and population distribution within each zone i. The groups are ordered descendingly by income from h = 1 to h = 5. A map of Santiago and the municipality and the zones considered is shown in Figure 1.

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the investment cost and are higher for schools having highquality infrastructure, with allowance for economies of scale in the case of large institutions. Management cost CGk (per student) was considered to be related to the schools administrative status and academic quality. Private establishments spend more on this item than subsidized ones, which in turn spend more than municipal schools. Within each of these sets of institutions, those with higher academic quality spend more than those whose academic quality is lower. The management cost parameter also incorporates economies of scale for large schools, those of high size CH having lower unit management costs than those of low size CL . As regards modes of transportation, two alternatives were considered: private (car) and public (bus), with cost ci jm are exogenous and estimated proportional to the distance between zones (i, j). k jm To estimate WPhi from Equation (4) we must rst estimate 0 the reference utility Vhi , based on an average of the benets for each possible alternative (k, j, m). Owing to the lack of observed prices and for simplicity, it was assumed that pk jl = 0, k, j, l, though it is not a real value (nor realistic in strict rigor). Thus,
0 Vhi = k, j,m f h (z k jm )

following equations: pk jl = CGk + 1, 1 CInvk j + CMk j , 0, 9 CapSupk j, k K G (10)

pk jl = (CGk tk ) +

1, 05 CInvk j + CMk j , 0, 9 CapSupk

j, k K S (11)

Observe that these equations generate higher prices for private schools and other institutions allocated in zones where land is more expensive. The third scenario is identical to the second (segregation) scenario except that prices are endogenously determined in the model. The private and subsidized schools have the option of choosing a price level among three possible options: l = 1: price level assumed in the previous scenarios. l = 2: 85% of price level in the previous scenarios. l = 3: 115% of price level in the previous scenarios. In the fourth scenario, the municipal school suppliers are part of the government and therefore minimize social spending rather than maximize prot. This requires that the objective function be modied by eliminating these schools economic prot from social benets and incorporating government spending instead. The rest of the scenario is the same as the base version. These modications give us the following: Max B.S. =
h,i,k, j,l,m

0 h ci jm

|K ||J ||M|

(9)

Note, that the value taken on by the parameter pk jl does not affect the solution in terms of the assignment of students to schools and the type of establishments supplied, but it does impact the size of the benets calculated below. Several runs were done considering different values for pk jl (some extremely high) and indeed for all of them same solution was obtained, only differentiated by the value of the benets. In the base scenario the attributes included in the estimate of WP are: level of subsidy, school capacity, academic quality, infrastructure quality, plus a further attribute related to the comfort level of the transportation mode (independent of cost ci jm ). The second scenario takes account of spatial segregation by supplementing the base scenario attributes with an additional zone attractiveness factor reecting the assumption that groups of a given socio-economic level value more highly those zones whose level is the same or better. For both of these scenarios we dene only one price level pk jl for k K P K S , that is, l L = {1}. This level was estimated in such a manner that each private school, operating at 90% of its capacity, obtains annual prots k jl equivalent to 10% of total investment, while each subsidized school receives ows equivalent to 5%. These prots are in concordance with estimated prots obtained by typical private and subsidized schools. Thus, in the application, the prots assumed affect the optimal solution through the prices they set for each type of school. However, it is important to notice that prots are exogenous parameters that can be adjusted to consider the level that is appropriate for prots if these change. The foregoing is expressed in the

CShi (nehi Nhi ) +

k K S K P j,l

k jlm

k jlm

k jl k jlm

(ne

, NCk jl ) G.G. (12)

where G.G. is comprised of spending on subsidies to students attending subsidized and municipal schools plus the operating and investment expenditures of the municipal institutions. Thus, G.G. =
h,i, j,l,m

k K S U K G

tk +
k K G k jl

k jlm (C G k pk jl )(nehi Nhi )

+
k K G , j,l

CInfk j NC

(13)

Social benets are then expressed as follows: B.S. =

h,i,k, j,l,m

((WPhi (z k jm ) ci jm CGk )(nehi Nhi ))

k K G

k jm

k jlm

tk
h,i, j,l,m

(nehi Nhi )
kK , j,l

k jlm

(CInfk j N C k jl ) (14)

The dimensions of the models representing each scenario are given in Table 1. The model was written in GAMS and solved using CPLEX 7.0 on a notebook computer with a Pentium 4 2.0 GHz

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Table 1

Dimension of optimization problem for each scenario solved Scenarios 1, 2 and 4 (1 price level) l {1} Scenario 3 (3 price levels) l {1, 2, 3} 17.640 294 294 18.228 30 588 17.640 102 204 18.360

Number of variables k jlm Continuous nehi Integer NCk jl Binary x k jl Total Number of constraints (a) Level of demand coverage h, i (b) Ability to pay h, i, m, k, j, l (c) Schoolcapacity k, j, l (d) Positive economic surplus k, j, l (e) Single price level k, j, l and k, j Total

6.120 102 102 6.324 30 204 6.120 102 204 6.660

processor and 512 MB of RAM. Required solution times were 28, 17, 80 and 60 min, respectively, for scenarios 1, 2, 3 and 4.

3.2. Numerical results

Among the main results of the model, those regarding optimal supply in the various scenarios are described below. Almost all of the scenarios produced the same total of 18 schools distributed among seven private institutions, nine subsidized and two municipal. The one exception was Scenario 4, in which government spending was minimized. The total number of schools in this case was one fewer than the others. Changes from scenario to scenario were observed in the spatial distribution of the schools, however, as can be seen in Table 2. Other data in the table indicate the socio-economic level of each zone in terms of the percentages of the resident population with high, middle and low incomes. Also displayed is a land value index correlated to households income levels at each zone, although the relationship is not exact due to other factors. The high concentration of schools in Zone 6 in the base scenario declines drastically in Scenarios 2 and 3 and rises again in Scenario 4, indicating that the segregation introduced in the second and third scenarios exerted a powerful effect. All of the scenarios show a spatial segregation of the different types of schools according to the zones socioeconomic level, which acts as a factor of attraction. Thus, the private establishments are concentrated in higher-income zones (1 and 2), the subsidized institutions are dispersed among the middle-income zones and the municipal schools congregate in the poorest ones (5 and 6). The results also indicate a high degree of population segregation in all scenarios, with high-income students concentrated in private schools, middle-income students in subsidized schools and low-income students in municipal schools. The only departure from this pattern is found in Scenario 4, where low-income students attend subsidized

institutions in signicant numbers. It should be recalled here that this distribution is not necessarily the best alternative for the consumers given that the optimum is also inuenced by the preferences of the suppliers. Other variations in the solutions were induced by the differences between the scenarios. In the second (segregation) scenario the number of students travelling to other zones falls from 50% in the base scenario to 42%, but the average distance travelled rises due to a slight increase in the total number of kilometers from 97,673 to 98,901 km. The freedom to choose prices, introduced in Scenario 3, caused a rise in the average price of the entire system that translates into 9% greater supplier prot than Scenario 2. The number of students travelling is also higher at 53% and the total number of kilometers travelled rises to 104,030 km. Both effects reduce consumer surplus by 27% compared to Scenario 2. In Scenarios 1, 2 and 3 the two municipal schools remain constant despite the segregation in the latter two cases. In Scenario 4, in which government spending is minimized but segregation and free choice of prices are eliminateda return, in effect, to the conditions of Scenario 1there is only one municipal school. The number of students travelling out of their zone of residence declines 46%, and kilometers travelled also falls. Another interesting aspect of the results is the variation in the distribution of benets between consumers and suppliers in each scenario, as summarized in Table 3. In every case the total supplier benets are greater than total consumer surplus. Indeed, the latter is approximately 30% of the former. This may be explained by the construction of the parameters in the expressions for both quantities. Owing to their arbitrary denition, particularly in the case of the consumer utility reference value, they lack a clear interpretation. To obtain a more realistic comparison, the consumer utility function parameters must be calibrated. Furthermore, planners can achieve greater equity between the agents by weighting the benets to consumers in such a way that in the aggregate, they are

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Table 2 Zone 1 2 (K P , CH , Q H , IG ) 2 2 (K P , CH , Q H , IG ) 1 (K S , CL , Q H , IG ) 2 (K S , CH , Q H , IG ) 5 0 6 1 (K P , CL , Q H , IG ) l = 3 1 (K P , CL , Q H , IG ) 5 (K S , CH , Q H , IG ) 1 1 1 (K P , CH , Q H , IG ) 1 (K P , CL , Q H , IG ) Zone 2 Zone 3 Zone 4 Zone 5

Spatial distribution of supply of schools Zone 6

Scenario

1 Base 3

1 (K P , CL , Q H , IG ) 2 (K P , CH , Q H , IG )

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Total

1 (K S , CL , Q H , IG ) 1 (K S , CL , Q L , IB ) 1 (K S , CH , Q H , IG ) 6 (K S , CH , Q H , IG ) 1 Municipal 1 Municipal 3 8 1 Municipal 1 (K S , CL , Q L , IB ) 1 Municipal 1 1 Municipal 2 1 Municipal

2 1+ Segregation 4

1 (K P , CL , Q H , IG ) 3 (K P , CH , Q H , IG )

Total

3 1 (K P , CL , Q H , IG ) l = 1 2(K P , CH , Q H , IG ) l = 2 2+ Freely chosen prices 3 (K P , CH , Q H , IG ) l = 3 1 (K S , CL , Q H , IG ) l = 3 5 (K S , CH , Q H , IG ) l = 1 4 2 (K P , CH , Q H , IG ) 2 HighMedium 65 34 1 9.0 35 64 1 10.0 1 MediumHigh 1 (K P , CH , Q H , IG ) 8 0

Total

1 (K S , CL , Q L , IB ) l = 2 2 (K S , CH , Q H , IG ) l = 2 4 1 (K P , CH , Q H , IG ) 1 Medium 10 89 1 7.4

1 2 (K S , CH , Q H , IG ) 2 (K S , CH , Q L , IB ) 1 Municipal 5 (K S , CH , Q H , IG ) 3 7 MediumLow 2 77 21 8.5 Low 1 45 54 6.5

4 1+ Govt. spending Total High 87 12 1 12.3

1 (K P , CL , Q H , IG ) 2 (K P , CH , Q H , IG ) 3

Socio-economic level of zone % of population with high, middle and low incomes

Land values (UF/m2 )

Land values given in UF/m2 (1 UF US$30). K: type of school (Private, Sub., Municipal); C: Capacity (high, low); Q: Quality (high, low); I: Infrastructure (good, bad).

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Table 3 Distribution of benets Scenario 1 Base Supply Demand h=1 h=2 h=3 h=4 h=5 Government spending Objective function 3426 1149 282 322 140 356 51 5293 4574 Scenario 2 Sch. 1 +Segregation 3493 1204 409 257 130 358 51 5293 4696 Scenario 3 Sch. 2 +Free choice of prices 3809 882 59 216 199 358 51 5293 4690 Scenario 4 Sch. 1 +Government spending 3626 845 266 85 117 327 50 4752 282

Note: All values are in millions of Chilean pesos.

of the same order of magnitude as the suppliers benets. In fact, the planners can construct an efcient curve of benets as they vary the weights assigned in the objective to the suppliers prots and consumers surplus. A further result of interest is the 10% reduction in government spending obtained by introducing a policy of minimizing such expenditure in the objective function (Scenario 4), which leads to a decline in the number of subsidized and municipal school students. Note that in this scenario the objective function changes, which explains the drastic variation in its value compared with the other scenarios. The results of the model given above display major differences from the actual situation in Santiago. Whereas the model indicates that 17 or 18 schools would be optimal, the actual number in the municipality is 60. But before drawing any conclusions from this discrepancy, certain assumptions in the model should be further claried: The model assumes a long-run optimum. There may be certain externalities or other phenomena such as historical inertias or cultural resistance that have not been incorporated into the model but which may prevent the observed situation from attaining the optimal conguration. Among these we may single out the cost of relocating or adjusting capacity of existing infrastructure. Also, operators may be reluctant to incur in the large investments needed for highcapacity schools, or the needed large land lots may be difcult to obtain. The model calls for the opening of a number of high-capacity schools, whereas existing schools for the most part have lower capacities thus leading to higher number of schools. When doing a run without high-capacity schools, the model calls for the opening of 30 schools, so there is still a difference with the actual number that may be explained by the next points. The scope of the study denes a closed market whereas in reality the single municipality studied is one of many in Santiago, and the data indicate that demand originating in the other municipalities amounts to 20% of its school-age population. There is also an unknown quantity of students from the municipality that attend schools in other areas. Thus,

the actual demand experienced by the municipality does not reect its resident population, and the inows and outows are not included in the total population gures for the various scenarios. This aspect of the study could be easily improved. For most of the parameters there was not sufcient or reliable enough data to develop rigorous calibration. Instead, values were estimated, based on evaluations of the real situation, revising several sources and analysis based on reasonable assumptions. Also, the schools were divided into relatively few categories whereas the reality is much more multi-dimensional. This has led to values that can be considered approximately close to the real ones, although these may introduce errors of unknown magnitude. Given sufcient information, the real parameters could be calibrated, and thus improve the quality of the parameters for the model. But the basic logic of the model presented in this paper would be the same. If the model had incorporated the various rigidities and conditions just mentioned, as well as all the required information, it could indicate an approximate social optimum that could then be properly compared with the existing equilibrium. Theoretically, the principal causes of the divergences between a social optimum and an actual equilibrium are the presence of externalities and cultural or historical inertia. With proper calibration, and including more explicitly real-estate considerations (no constraints on the difculties in securing large lots to construct large schools for example have been dened), the evaluation of socially optimal congurations could be improved. This socially optimal solution could be used to guide changes, through subsidies, regulations or other means, to modify the existing equilibrium solution in the direction of the social optimum

4. Conclusions
A linear optimization model was created for the allocation of schools to zones that can be employed as a support tool in strategic decision-making. Existing optimal location models for public services such as schools make restrictive assumptions regarding individual

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behaviour. This study takes an innovative step by incorporating into the objective function a measure of the benets derived by suppliers and consumers that is based on various supply attributes rather than merely distance (or travel time) from the consumers residence. Thus, the homogeneity of supply assumption is dispensed with through the inclusion of quality factors that differentiate the various supply options. The model simultaneously determines the allocation of various predened types of schools and the assignment of different categories of students to them, maximizing the total benets perceived by the economic agents. These agents consist of students, who demand education, and school owners who supply it. The dimension of the optimization problem is given by the number of school and student categories dened. The benets obtained by students are given by their consumer surplus measured in monetary terms, and are dened as the difference between their willingness to pay and what they actually do pay. This surplus is modelled deterministically as a linear function of price, transportation costs, and certain school and mode of transportation attributes considered to be relevant. The economic surplus of the different types of school is modelled as the sum of the income (revenues) received less operating costs (management and maintenance) and the annualized required investment cost. Economies and diseconomies of scale are incorporated into the parameters dening the management and maintenance costs. Total benets are obtained by simple aggregation of the benets of consumers (students) and suppliers (school owners). The distribution of benets is ignored on the assumption that benets to any agent are valued equally by society. However, the model could also be applied with policies that assign different social values to different agents through the use of a set of parameters that apply differential weights to individual utilities. In such a case, the form of the optimization problem would remain unchanged. Since price does not enter into the objective function (it cancels out as an explicit parameter) but is present in the constraints, small variations in price that do not activate the related constraints (budget constraints for consumers and positive utility constraints for school suppliers) do not change the optimal solution values. They do, however, generate different solutions for the system as regards the price charged by the schools that are opened, and therefore impact the distribution of the total benets between suppliers and demanders. The prices that may be dened exogenously in the model are bounded below by the non-negative prot constraint and above by the municipal school budget. This latter bound is necessary because of the combined effect of some other constraints. If private and subsidized schools chose prices so high that no student could pay them without violating their budget constraint (constraint b), they would all have to attend municipal schools in order to satisfy the total coverage constraint (ie, constraint a, requiring that all students must

attend a school). The capacity of these institutions is limited by their xed budgets (constraint d.ii), however, and cannot meet the entire system demand or even a large part of it. Therefore, limits are indirectly imposed on the prices charged by private and subsidized schools to fulll a feasibility condition for the total coverage constraint. The solution generated by the model assumes that there exist agentsdemanderswho choose alternatives that do not maximize their own benets, thus permitting other agentssuppliersto choose alternatives that contribute to greater total welfare for the entire system. Thus, the solutions found do not imply an equilibrium in terms of agents preferences, since those who are not assigned to the alternative that maximizes their utility have an incentive to deviate from the proposed assignment. This means that the relative scale of the parameters associated with the benets obtained by consumer and supplier groups plays an important role in the application of the model, given that the parameters determine who contributes the most benets to the system, and therefore also determine the characteristics of the solution If the objective function is modied to incorporate government spending as a component of social benets, the results show that it is preferable to have fewer municipal schools and to reduce the number of students attending subsidized ones. One main concern of the government and society is the low quality of education in municipal schools, motivated largely by the low nancial support from the government for these schools. The presented approach could be used to evaluate an increase in government spending to improve the quality of the municipal schools, and have at least some of them of higher quality in infrastructure and quality of education. This is the case already for several municipal schools in the city, located in other municipalities. In this case, we would need to also consider in the model high-quality municipal schools that accept only the best students. Moreover, due to the characteristics of the model, it can be parameterized for different objective functions in which certain given attributes are prioritized. As was already observed in the previous section, various factors related to characteristics of existing schools, the lack of information, the use of approximations, the modelling of the municipality as a closed system, and the omission of inow and outow effects all tend to distance the model proposed here from an accurate portrayal of the real situation. Externalities and historical or cultural inertia that divert the observed situation from the solutions generated by the various scenarios considered are further possible sources of serious distortion. It should be possible, however, to calibrate the models parameters and, thus, to overcome these limitations in a real study. The results of such a model could then be compared with the current reality and used as a reference for adopting measures that would bring this equilibrium closer to a social optimum. Finally, as it was described earlier, the current schools location in Santiago might not be socially optimal. This situation

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could be addressed applying a social optimum model such as the one presented here which can be useful as a support tool to government organizations or decision-makers on how to move equilibrium closer to the social optimum through subsidies, regulations and other measures.
Acknowledgements This research was partly funded by Milenium Institute, Complex Engineering Systems and Fondecyt under Grants 1060807 and 1060788.

References
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Martnez F (2002). Towards a microeconomic framework for travel behaviour and land use interactions. In: Mahamasani H (ed). Perpetual Motion Travel Behaviour Research Opportunities and Application Changes. Elsevier Science Ltd. Pergamon: Amsterdam. pp 261276 Chapter 12. Photis YN and Koutsopoulos KC. (2003). Supporting locational decision making: Regionalization of service delivery system. National Technical University of Athens. Pizzolato ND and Fraga da Silva HB (1997). The location of public schools: Evaluation of practical experiences. Int Trans Opns Res 4(1): 1322. Pizzolato ND, Broseghini F and Nogueira L (2004). School location methodology in urban areas of developing countries. Int Trans Opns Res 11(6): 667681. Rosen S (1974). Hedonic prices and implicit markets: Product differentiation in pure competition. J Polit Econ 82(1): 3455. Varian HR (1992). Microeconomic Analysis. Antoni Bosch Editor: Barcelona.

Received December 2006; accepted February 2008 after one revision