Competitive intermodal hub location model with endogenous pricing

Road transportation has successively captured the majority of the transportation market in most of the economies. Massive amounts of flows are moving through road network, which is resulting in an unsustainable economy with congestion and environmental problems. In order to tackle the problem, intermodality can be utilized in logistics networks. Railroad transportation is one of the smooth ways of transportation in several ways. It can reduce the congestion and also it is more cost effective. In order to be able to utilize the economy of scale and reduce the transportation cost in the logistics network, hubs can be established in some points of the network. Understanding the transition of demand under a competitive intermodal hub location model is the aim of this study. One of the most important factors in customer behavior is the price that the firm is charging and it is more reasonable to model the demand as a function of price. To do so, a discrete choice logit model is applied in a Mixed Integer Nonlinear Programming (MINLP) framework and an efficient heuristics solution is provided. Moreover, actual Turkish network data for rail transport is being considered in the model, on top of the CAB data and optimal price strategy is derived out of the model.