Network flow problems with pricing decisions |
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Authors: | Thomas C Sharkey |
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Institution: | 1. Department of Industrial and Systems Engineering, Rensselaer Polytechnic Institute, Troy, NY, 12180, USA
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Abstract: | This paper considers a class of network flow problems in which the demand levels of the nodes are determined through pricing
decisions representing the revenue received per unit demand at the nodes. We must simultaneously determine the pricing decisions
and the network flow decisions in order to maximize profits, i.e., the revenues received from the pricing decisions minus
the cost of the network flow decisions. Specializations of this class of problems have numerous applications in supply chain
management. We show that the class of problems with a single pricing decision throughout the network can be solved in polynomial
time under both continuous pricing restrictions and integer pricing restrictions. For the class of problems with customer-specific
pricing decisions, we provide conditions under which the problem can be solved in polynomial-time for continuous pricing restrictions
and prove that the problem is NP-hard for integer pricing restrictions. |
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Keywords: | |
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