Hub location under competition

Ali Irfan Mahmutogullari and Bahar Y. Kara

European Journal of Operational Research, 2016, vol. 250, issue 1, 214-225

Abstract: Hubs are consolidation and dissemination points in many-to-many flow networks. Hub location problem is to locate hubs among available nodes and allocate non-hub nodes to these hubs. The mainstream hub location studies focus on optimal decisions of one decision-maker with respect to some objective(s) even though the markets that benefit hubbing are oligopolies. Therefore, in this paper, we propose a competitive hub location problem where the market is assumed to be a duopoly. Two decision-makers (or firms) sequentially decide locations of their hubs and then customers choose one firm with respect to provided service levels. Each decision-maker aims to maximize his/her own market share. We propose two problems for the leader (former decision-maker) and follower (latter decision-maker): (r|Xp)hub−medianoid and (r|p)hub−centroid problems, respectively. Both problems are proven to be NP-complete. Linear programming models are presented for these problems as well as exact solution algorithms for the (r|p)hub−centroid problem. The performance of models and algorithms are tested by computational analysis conducted on CAB and TR data sets.

Keywords: Hub location; Competition models; Competitive location (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:250:y:2016:i:1:p:214-225

DOI: 10.1016/j.ejor.2015.09.008

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