TY - JOUR
T1 - A competitive hub location and pricing problem
AU - Lüer-Villagra, Armin
AU - Marianov, Vladimir
N1 - Funding Information:
We thank Professor James Campbell and three anonymous reviewers for their insightful comments and suggestions, that significantly improved this paper. This work was in part supported by FONDECYT Grant 1100296 , and also by Institute Complex Engineering Systems , through Grants ICM-MIDEPLAN P-05-004-F and CONICYT FBO16 .
PY - 2013/12/16
Y1 - 2013/12/16
N2 - We formulate and solve a new hub location and pricing problem, describing a situation in which an existing transportation company operates a hub and spoke network, and a new company wants to enter into the same market, using an incomplete hub and spoke network. The entrant maximizes its profit by choosing the best hub locations and network topology and applying optimal pricing, considering that the existing company applies mill pricing. Customers' behavior is modeled using a logit discrete choice model. We solve instances derived from the CAB dataset using a genetic algorithm and a closed expression for the optimal pricing. Our model confirms that, in competitive settings, seeking the largest market share is dominated by profit maximization. We also describe some conditions under which it is not convenient for the entrant to enter the market.
AB - We formulate and solve a new hub location and pricing problem, describing a situation in which an existing transportation company operates a hub and spoke network, and a new company wants to enter into the same market, using an incomplete hub and spoke network. The entrant maximizes its profit by choosing the best hub locations and network topology and applying optimal pricing, considering that the existing company applies mill pricing. Customers' behavior is modeled using a logit discrete choice model. We solve instances derived from the CAB dataset using a genetic algorithm and a closed expression for the optimal pricing. Our model confirms that, in competitive settings, seeking the largest market share is dominated by profit maximization. We also describe some conditions under which it is not convenient for the entrant to enter the market.
KW - Competitive models
KW - Hub and spoke
KW - Hub location problems
KW - Location
KW - Location and pricing
UR - http://www.scopus.com/inward/record.url?scp=84881249656&partnerID=8YFLogxK
U2 - 10.1016/j.ejor.2013.06.006
DO - 10.1016/j.ejor.2013.06.006
M3 - Article
AN - SCOPUS:84881249656
SN - 0377-2217
VL - 231
SP - 734
EP - 744
JO - European Journal of Operational Research
JF - European Journal of Operational Research
IS - 3
ER -