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Risk Averse Second Best Toll Pricing

In: Transportation and Traffic Theory 2009: Golden Jubilee

Author

Listed:
  • Xuegang (Jeff)Ban

    (Rensselaer Polytechnic Institute)

  • Shu Lu

    (University of North Carolina at Chapel Hill)

  • Michael Ferris

    (University of Wisconsin-Madison)

  • Henry X. Liu

    (University of Minnesota)

Abstract

Existing second best toll pricing (SBTP) models determine optimal tolls of a subset of links in a transportation network by minimizing certain system objective, while the traffic flow pattern is assumed to follow user equilibrium (UE). We show in this paper that such toll design approach is risk prone, which tries to optimize for the best-case scenario, if the UE problem has multiple solutions. Accordingly, we propose a risk averse SBTP approach aiming to optimize for the worst-case scenario, which can be formulated as a min-max problem. We establish a general solution existence condition for the risk averse model and discuss in detail that such a condition may not be always satisfied in reality. In case a solution does not exist, it is possible to replace the exact UE solution set by a set of approximate solutions. This replacement guarantees the solution existence of the risk averse model. We then develop a scheme such that the solution set of an affine UE can be explicitly expressed. Using this explicit representation, an improved simplex method can be adopted to solve the risk averse SBTP model.

Suggested Citation

  • Xuegang (Jeff)Ban & Shu Lu & Michael Ferris & Henry X. Liu, 2009. "Risk Averse Second Best Toll Pricing," Springer Books, in: William H. K. Lam & S. C. Wong & Hong K. Lo (ed.), Transportation and Traffic Theory 2009: Golden Jubilee, chapter 0, pages 197-218, Springer.
    • Handle: RePEc:spr:sprchp:978-1-4419-0820-9_10
    DOI: 10.1007/978-1-4419-0820-9_10
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    Citations

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    Cited by:

    1. (Jeff) Ban, Xuegang & Ferris, Michael C. & Tang, Lisa & Lu, Shu, 2013. "Risk-neutral second best toll pricing," Transportation Research Part B: Methodological, Elsevier, vol. 48(C), pages 67-87.
    2. Byung Chung & Tao Yao & Chi Xie & Andreas Thorsen, 2011. "Robust Optimization Model for a Dynamic Network Design Problem Under Demand Uncertainty," Networks and Spatial Economics, Springer, vol. 11(2), pages 371-389, June.
    3. Di, Xuan & Ma, Rui & Liu, Henry X. & Ban, Xuegang (Jeff), 2018. "A link-node reformulation of ridesharing user equilibrium with network design," Transportation Research Part B: Methodological, Elsevier, vol. 112(C), pages 230-255.
    4. Di, Xuan & Liu, Henry X. & Ban, Xuegang (Jeff), 2016. "Second best toll pricing within the framework of bounded rationality," Transportation Research Part B: Methodological, Elsevier, vol. 83(C), pages 74-90.
    5. He, Fang & Yin, Yafeng & Chen, Zhibin & Zhou, Jing, 2015. "Pricing of parking games with atomic players," Transportation Research Part B: Methodological, Elsevier, vol. 73(C), pages 1-12.
    6. Chung, Byung Do & Yao, Tao & Friesz, Terry L. & Liu, Hongcheng, 2012. "Dynamic congestion pricing with demand uncertainty: A robust optimization approach," Transportation Research Part B: Methodological, Elsevier, vol. 46(10), pages 1504-1518.
    7. (Jeff) Ban, Xuegang & Dessouky, Maged & Pang, Jong-Shi & Fan, Rong, 2019. "A general equilibrium model for transportation systems with e-hailing services and flow congestion," Transportation Research Part B: Methodological, Elsevier, vol. 129(C), pages 273-304.
    8. M. Beatrice Lignola & Jacqueline Morgan, 2012. "Approximating Security Values of MinSup Problems with Quasi-variational Inequality Constraints," CSEF Working Papers 321, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 Oct 2014.
    9. Ma, Rui & Ban, Xuegang (Jeff) & Szeto, W.Y., 2017. "Emission modeling and pricing on single-destination dynamic traffic networks," Transportation Research Part B: Methodological, Elsevier, vol. 100(C), pages 255-283.

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