Relative Explanations for Contextual Problems with Endogenous Uncertainty: An Application to Competitive Facility Location

Abstract

In this paper, we consider a contextual stochastic optimization problem in which unknown parameters follow distributions that depend on contextual covariates and decisions. The problem is motivated by transportation infrastructure decisions such as facility location or network design. In such high-stakes settings, decisions must often be communicated, justified, and reconsidered under alternative stakeholder requirements. To this end, we propose a framework for computing relative counterfactual explanations. These explanations identify the smallest changes in the covariates required for a solution to satisfy prescribed constraints while limiting the performance loss to a controlled level. Whereas relative explanations have been introduced in prior literature, to the best of our knowledge, this is the first work focusing on problems with binary decision variables and endogenous uncertainty. We propose a methodology that uses the Wasserstein distance as a regularization term in the objective. Beyond improving tractability, this regularization yields explanations with desirable structural properties: it produces sparser counterfactuals, induces smoother transitions in the underlying choice distributions, and keeps the counterfactual behavior close to realistic demand patterns. We illustrate the method using a choice-based competitive facility location problem and present numerical experiments that demonstrate its ability to efficiently compute sparse, plausible, and interpretable explanations. We further validate the framework on a real-world case study of electric vehicle charging station planning in Montreal, where the explanations reveal the minimal capacity investments and environmental conditions required to justify including a candidate location in the charging network.