Logit network pricing

In this paper, we address a pricing problem defined over a transportation network, and where the underlying flow is assigned according to the logit model. This setting yields a nonlinear optimization problem that yet possesses strong combinatorial features. Taking advantage of the model's analytical properties, we characterize its first‐order optimality conditions and introduce rules that simplify the network topology, while leaving the structure of optimal solutions unchanged. Based on these results, a class of unimodal instances is identified. Finally, the connection with the more classical problem known as ‘product line pricing’ in economics is emphasized.