Cruise Network Design under Sequential Duopolistic Entry

Abstract

This study addresses the network design for international cruise services in a duopolistic market, where carriers enter and make decisions sequentially. The leader, who makes the first move, makes decisions as there is no competitor in the market. The follower, who makes decisions later, has to design their network considering the existing leader's network. The leader's model is a mixed integer linear problem while the follower's model is a mixed integer nonlinear problem. Therefore, a heuristic is proposed to solve the problem. The commercially available general algebraic modeling system is used in conjunction with its different solvers to solve the problems. Finally, the performance of the models is tested using an illustrated network. The results highlight the importance of considering competitive influence and show that our methods are able to handle the problem in a competitive environment.