The hub location and pricing problem.

Resumen

This paper introduces the joint problem of locating hubs on a network and determining transportation prices between the hubs. Two levels of decision makers are present in the problem acting non- cooperatively: hub transportation provider and customers. The objective of the hub transportation provider is to locate hubs and to set the prices (per unit of commodity) of crossing the hub arcs maximizing its profit, whereas thecustomers aim is to send their commodities, in the cheapest way, having the possibility of using the hub arcs at the price set by the hub transportation provider or using the existing network at a predefined tariff. The problem is modeled as a nonlinear bilevel programming formulation, which is in turn linearized, and strengthened through variable reductions as well as valid inequalities. Computational results of mixed integer programming models and a metaheuristic on instances adapted from the literature are presented.