A Tabu Search Based Solution Approach to the Competitive Multiple Allocation Hub Location Problem

The hub location problems (HLP) constitute an important class of facility location problems that have been addressed by numerous operations researchers in recent years. HLP is a strategic problem frequently encountered in designing logistics and transportation networks. Here, we address the competitive multiple allocation HLP in a duopoly market. It is assumed that an incumbent firm (the leader) is operating an existing hub network in a market and an entrant firm (the follower) tries to enter the market by locating its own hubs aiming at capturing as much flow as possible from the leader. The customers choose one firm based on the service level (cost, time, distance, etc.) provided by the firm. We formulate the problem from the entrant firm’s point of view and propose an efficient tabu search based solution algorithm to solve it. Computational experiments show the capability of the proposed solution algorithm to obtain the optimal solutions in short computing times.