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Hub Location Problems with Price Sensitive Demands

Author

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  • Morton O’Kelly
  • Henrique Luna
  • Ricardo Camargo
  • Gilberto Miranda

Abstract

This work addresses the hub location problem with price-sensitive demands. The article analyzes sensitivity of demand to quality of service in such systems, and enables the solution of large-scale instances. Two distinct working formulations are provided, and an improved Benders decomposition algorithm is deployed. Simulation of consumer choice between competing services is addressed in the computational experiments. Further, a specialized sub-problem solution procedure which is able to deliver good Benders cuts in reasonable time is developed. The results are illustrated with standard test data sets. The research contributes to a better understanding of hub traffic with varying service levels, as well as price equilibrium in competitive markets. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Morton O’Kelly & Henrique Luna & Ricardo Camargo & Gilberto Miranda, 2015. "Hub Location Problems with Price Sensitive Demands," Networks and Spatial Economics, Springer, vol. 15(4), pages 917-945, December.
    • Handle: RePEc:kap:netspa:v:15:y:2015:i:4:p:917-945
    DOI: 10.1007/s11067-014-9276-0
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    3. Erdoğan, Güneş & Battarra, Maria & Rodríguez-Chía, Antonio M., 2022. "The hub location and pricing problem," European Journal of Operational Research, Elsevier, vol. 301(3), pages 1035-1047.
    4. Alibeyg, Armaghan & Contreras, Ivan & Fernández, Elena, 2018. "Exact solution of hub network design problems with profits," European Journal of Operational Research, Elsevier, vol. 266(1), pages 57-71.
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    6. Domínguez-Bravo, Carmen-Ana & Fernández, Elena & Lüer-Villagra, Armin, 2024. "Hub location with congestion and time-sensitive demand," European Journal of Operational Research, Elsevier, vol. 316(3), pages 828-844.
    7. Alumur, Sibel A. & Campbell, James F. & Contreras, Ivan & Kara, Bahar Y. & Marianov, Vladimir & O’Kelly, Morton E., 2021. "Perspectives on modeling hub location problems," European Journal of Operational Research, Elsevier, vol. 291(1), pages 1-17.
    8. Nader Ghaffarinasab & Bahar Y. Kara, 2019. "Benders Decomposition Algorithms for Two Variants of the Single Allocation Hub Location Problem," Networks and Spatial Economics, Springer, vol. 19(1), pages 83-108, March.
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    11. Zhang, Qi & Wang, Wenyuan & Peng, Yun & Zhang, Junyi & Guo, Zijian, 2018. "A game-theoretical model of port competition on intermodal network and pricing strategy," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 114(C), pages 19-39.
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