Geodesic
A leader-follower single allocation hub location problem under fixed markups
Filomat, Tome 34 (2020) no. 8, p. 2463

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DOI

This study examines a scenario in which two competitors, called a leader and a follower, sequentially create their hub and spoke networks to maximize their profits. It is assumed that a non-hub node can be allocated to at most one hub. The pricing is regulated with a fixed markup. Demand is split according to the logit model, and customers patronize their choice of route by a price. Two variants of this Stackelberg competition are addressed: deterministic and robust. In both cases, it was shown how to present the problem as a bi-level mixed-integer non-linear program. When it comes to the deterministic variant, a mixed-integer linear reformulation of the follower's model is given. For the robust variant, it is shown how to reformulate the follower's program as a mixed-integer conic-quadratic one. The benefits of these reformulations are that they allow the usage of state-of-the-art solvers in finding feasible solutions. As a solution approach for the leader, an alternating heuristic is proposed. Computational experiments are conducted on the set of CAB instances and thoroughly discussed, providing some managerial insights.
DOI : 10.2298/FIL2008463C
Classification : 90B50, 91B24, 91A80
Keywords: Stackelberg competition, hub location, single allocation, fixed markup, robust optimization 
Dimitrije D Čvokić. A leader-follower single allocation hub location problem under fixed markups. Filomat, Tome 34 (2020) no. 8, p. 2463 . doi: 10.2298/FIL2008463C
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     title = {A leader-follower single allocation hub location problem under fixed markups},
     journal = {Filomat},
     pages = {2463 },
     year = {2020},
     volume = {34},
     number = {8},
     doi = {10.2298/FIL2008463C},
     language = {en},
     url = {http://geodesic.mathdoc.fr/articles/10.2298/FIL2008463C/}
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