A Leader-Follower Hub Location Problem Under Fixed Markups
نویسندگان
چکیده
Two competitors, a Leader and a Follower, are sequentially creating their hub and spoke networks to attract customers in a market where prices have fixed markups. Each competitor wants to maximize his profit, rather than a market share. Demand is split according to the logit model. The goal is to find the optimal hub and spoke topology for the Leader. We represent this Stackelberg game as a nonlinear mixedinteger bi-level optimisation problem and show how to reformulate the Follower’s problem as a mixed-integer linear program. Exploiting this reformulation, we solve instances based on a synthetic data using the alternating heuristic as a solution approach. Computational results are thoroughly discussed, consequently providing some managerial insights.
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