Asymmetry in the Complexity of the Multi-Commodity Network Pricing Problem

Abstract

The network pricing problem (NPP) is a bilevel problem, where the leader optimizes its revenue by deciding on the prices of certain arcs in a graph, while expecting the followers (also known as the commodities) to choose a shortest path based on those prices. In this paper, we investigate the complexity of the NPP with respect to two parameters: the number of tolled arcs, and the number of commodities. We devise a simple algorithm showing that if the number of tolled arcs is fixed, then the problem can be solved in polynomial time with respect to the number of commodities. In contrast, even if there is only one commodity, once the number of tolled arcs is not fixed, the problem becomes NP-hard. We characterize this asymmetry in the complexity with a novel property named strong bilevel feasibility. Finally, we describe an algorithm to generate valid inequalities to the NPP based on this property, accommodated with numerical results to demonstrate its effectiveness in solving the NPP with a high number of commodities.