TY - GEN

T1 - The competitive hub location under the price war

AU - Čvokić, Dimitrije D.

AU - Kochetov, Yury A.

AU - Plyasunov, Aleksandr V.

AU - Savić, Aleksandar

PY - 2019/1/1

Y1 - 2019/1/1

N2 - Two transportation companies want to enter the market and they are aware of each other. The objective for the both of competitors is to maximize their respective profits by finding the best hub and spoke networks and price structures. One company wants to establish r hubs and the other wants to establish p hubs. It is assumed that the customers choose the route by price and the logistic regression based model is used to estimate how the demand is shared. After setting their networks, the competing companies engage in the price war. We propose a new model for finding a Stackelberg strategy that includes a price game, as bi-level nonlinear mixed-integer program, called the (r|p) hub-centroid problem under the price war. It is shown that there is a unique finite Bertrand-Nash price equilibrium. On the basis of this result, we show the solution existence, propose a new equations for the best response pricing, and address the computational complexity of the problem. Finally, we discuss some possible future research directions that concern the solution approach and some other competitive scenarios that involve pricing.

AB - Two transportation companies want to enter the market and they are aware of each other. The objective for the both of competitors is to maximize their respective profits by finding the best hub and spoke networks and price structures. One company wants to establish r hubs and the other wants to establish p hubs. It is assumed that the customers choose the route by price and the logistic regression based model is used to estimate how the demand is shared. After setting their networks, the competing companies engage in the price war. We propose a new model for finding a Stackelberg strategy that includes a price game, as bi-level nonlinear mixed-integer program, called the (r|p) hub-centroid problem under the price war. It is shown that there is a unique finite Bertrand-Nash price equilibrium. On the basis of this result, we show the solution existence, propose a new equations for the best response pricing, and address the computational complexity of the problem. Finally, we discuss some possible future research directions that concern the solution approach and some other competitive scenarios that involve pricing.

KW - Bertrand price equilibrium

KW - Complexity

KW - Hub location

KW - Logit model

KW - Stackelberg strategy

UR - http://www.scopus.com/inward/record.url?scp=85067692841&partnerID=8YFLogxK

U2 - 10.1007/978-3-030-22629-9_10

DO - 10.1007/978-3-030-22629-9_10

M3 - Conference contribution

AN - SCOPUS:85067692841

SN - 9783030226282

T3 - Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)

SP - 133

EP - 146

BT - Mathematical Optimization Theory and Operations Research - 18th International Conference, MOTOR 2019, Proceedings

A2 - Khachay, Michael

A2 - Pardalos, Panos

A2 - Kochetov, Yury

PB - Springer-Verlag GmbH and Co. KG

T2 - 18th International Conference on Mathematical Optimization Theory and Operations Research, MOTOR 2019

Y2 - 8 July 2019 through 12 July 2019

ER -