Toll caps in privatized road networks

Tobias Harks, Marc Schroeder*, Dries Vermeulen

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We consider a network pricing game on a parallel network with congestion effects in which link owners set tolls for travel so as to maximize profit. A central authority is able to regulate this competition by means of a (uniform) price cap. The first question we want to answer is how such a cap should be designed in order to minimize the total congestion. We provide an algorithm that finds an optimal price cap for networks with affine latency functions and a full support wardrop equilibrium. Second, we consider the induced network performance at an optimal price cap. We show that for two link networks with affine latency functions, the congestion costs at the optimal price cap are at most 8/7 times the optimal congestion costs. For more general latency functions, this bound goes up to 2 under the assumption that an uncapped nash equilibrium exists. However, in general such an equilibrium need not exist and this can be used to show that optimal price caps can induce arbitrarily inefficient flows.
Original languageEnglish
Pages (from-to)947-956
Number of pages10
JournalEuropean Journal of Operational Research
Volume276
Issue number3
DOIs
Publication statusPublished - 1 Aug 2019

Keywords

  • Game theory
  • Competition regulation
  • Toll caps
  • Nash equilibrium
  • Wardrop equilibrium
  • MULTICOMMODITY NETWORKS
  • PRICE-COMPETITION
  • EFFICIENCY
  • ALGORITHM
  • ANARCHY

Cite this

Harks, Tobias ; Schroeder, Marc ; Vermeulen, Dries. / Toll caps in privatized road networks. In: European Journal of Operational Research. 2019 ; Vol. 276, No. 3. pp. 947-956.
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title = "Toll caps in privatized road networks",
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Toll caps in privatized road networks. / Harks, Tobias; Schroeder, Marc; Vermeulen, Dries.

In: European Journal of Operational Research, Vol. 276, No. 3, 01.08.2019, p. 947-956.

Research output: Contribution to journalArticleAcademicpeer-review

TY - JOUR

T1 - Toll caps in privatized road networks

AU - Harks, Tobias

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AU - Vermeulen, Dries

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AB - We consider a network pricing game on a parallel network with congestion effects in which link owners set tolls for travel so as to maximize profit. A central authority is able to regulate this competition by means of a (uniform) price cap. The first question we want to answer is how such a cap should be designed in order to minimize the total congestion. We provide an algorithm that finds an optimal price cap for networks with affine latency functions and a full support wardrop equilibrium. Second, we consider the induced network performance at an optimal price cap. We show that for two link networks with affine latency functions, the congestion costs at the optimal price cap are at most 8/7 times the optimal congestion costs. For more general latency functions, this bound goes up to 2 under the assumption that an uncapped nash equilibrium exists. However, in general such an equilibrium need not exist and this can be used to show that optimal price caps can induce arbitrarily inefficient flows.

KW - Game theory

KW - Competition regulation

KW - Toll caps

KW - Nash equilibrium

KW - Wardrop equilibrium

KW - MULTICOMMODITY NETWORKS

KW - PRICE-COMPETITION

KW - EFFICIENCY

KW - ALGORITHM

KW - ANARCHY

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