Geodesic
A cut generation algorithm of finding an~optimal~solution in a market competition
Diskretnyj analiz i issledovanie operacij, Tome 26 (2019) no. 2, pp. 5-29

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We consider a mathematical model of market competition between two parties. The parties sequentially bring their products to the market while aiming to maximize profit. The model is based on the Stackelberg game and formulated as a bilevel integer mathematical program. The problem can be reduced to the competitive facility location problem (CompFLP) with a prescribed choice of suppliers which belongs to a family of bilevel models generalizing the classical facility location problem. For the CompFLP with a prescribed choice of suppliers, we suggest an algorithm of finding a pessimistic optimal solution. The algorithm is an iterative procedure that successively strengthens an estimating problem with additional constraints. The estimating problem provides an upper bound for the objective function of the CompFLP and is resulted from the bilevel model by excluding the lower-level objective function. To strengthen the estimating problem, we suggest a new family of constraints. Numerical experiments with randomly generated instances of the CompFLP with prescribed choice of suppliers demonstrate the effectiveness of the algorithm. Tab. 2, bibliogr. 17.
Keywords: market competition, Stackelberg game, bilevel programming, estimating problem. 
@article{DA_2019_26_2_a0,
     author = {V. L. Beresnev and A. A. Melnikov},
     title = {A cut generation algorithm of finding an~optimal~solution in a market competition},
     journal = {Diskretnyj analiz i issledovanie operacij},
     pages = {5--29},
     publisher = {mathdoc},
     volume = {26},
     number = {2},
     year = {2019},
     language = {ru},
     url = {http://geodesic.mathdoc.fr/item/DA_2019_26_2_a0/}
}
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V. L. Beresnev; A. A. Melnikov. A cut generation algorithm of finding an~optimal~solution in a market competition. Diskretnyj analiz i issledovanie operacij, Tome 26 (2019) no. 2, pp. 5-29. http://geodesic.mathdoc.fr/item/DA_2019_26_2_a0/