Tolling, collusion and equilibrium problems with equilibrium constraints
An Equilibrium Problem with an Equilibrium Constraint (EPEC) is a mathematical construct that can be applied to private competition in highway networks. In this paper we consider the problem of finding a Nash Equilibrium in a situation of competition in toll pricing on a network utilising two alternative algorithms. In the first algorithm, we utilise a Gauss Seidel fixed point approach based on the cutting constraint algorithm for toll pricing. The second algorithm that we propose, a novel contribution of this paper, is the extension of an existing sequential linear complementarity programming approach for finding the competitive Nash equilibrium when there is a lower level equilibrium constraint. Finally we develop an intuitive approach to represent collusion between players and demonstrate that as the level of collusion goes from none to full collusion so the solution maps from the Nash to monopolistic solution. However we also show that there may be local solutions for the collusive monopoly which lie closer to the second best welfare toll solution than does the competitive Nash equilibrium.
Volume (Year): (2010)
Issue (Month): 44 ()
|Contact details of provider:|| |
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, June.
- Cardell, Judith B. & Hitt, Carrie Cullen & Hogan, William W., 1997. "Market power and strategic interaction in electricity networks," Resource and Energy Economics, Elsevier, vol. 19(1-2), pages 109-137, March.
When requesting a correction, please mention this item's handle: RePEc:sot:journl:y:2010:i:44:p:3-22. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Romeo Danielis)
If references are entirely missing, you can add them using this form.