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Mixed-logit network pricing

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  • François Gilbert
  • Patrice Marcotte
  • Gilles Savard
Abstract
This paper addresses a network pricing problem where users are assigned to the paths of a transportation network according to a mixed logit model, i.e., price sensitivity varies across the user population. For its solution, we propose algorithms based on combinatorial approximations, and show that the smoothing effect induced by both the discrete choice and price sensitivity features of the model help in determining near-global solutions. This stands in contrast with simpler formulations where the main difficulty is due to the combinatorial nature of the problem. From an economic point of view, we provide an estimate of the proportion of revenue raised from the various population segments, an information that can be used for policy purposes. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • François Gilbert & Patrice Marcotte & Gilles Savard, 2014. "Mixed-logit network pricing," Computational Optimization and Applications, Springer, vol. 57(1), pages 105-127, January.
    • Handle: RePEc:spr:coopap:v:57:y:2014:i:1:p:105-127
    DOI: 10.1007/s10589-013-9585-0
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    References listed on IDEAS

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    1. Martine Labbé & Patrice Marcotte & Gilles Savard, 1998. "A Bilevel Model of Taxation and Its Application to Optimal Highway Pricing," Management Science, INFORMS, vol. 44(12-Part-1), pages 1608-1622, December.
    2. Sven B. Erlander, 2010. "Cost-Minimizing Choice Behavior in Transportation Planning," Advances in Spatial Science, Springer, number 978-3-642-11911-8.
    3. Yang, Hai & Zhang, Xiaoning & Meng, Qiang, 2004. "Modeling private highways in networks with entry-exit based toll charges," Transportation Research Part B: Methodological, Elsevier, vol. 38(3), pages 191-213, March.
    4. Mustapha Bouhtou & Stan van Hoesel & Anton F. van der Kraaij & Jean-Luc Lutton, 2007. "Tariff Optimization in Networks," INFORMS Journal on Computing, INFORMS, vol. 19(3), pages 458-469, August.
    5. Greene, William H. & Hensher, David A., 2003. "A latent class model for discrete choice analysis: contrasts with mixed logit," Transportation Research Part B: Methodological, Elsevier, vol. 37(8), pages 681-698, September.
    6. Connors, Richard D. & Sumalee, Agachai & Watling, David P., 2007. "Sensitivity analysis of the variable demand probit stochastic user equilibrium with multiple user-classes," Transportation Research Part B: Methodological, Elsevier, vol. 41(6), pages 593-615, July.
    7. Ward Hanson & Kipp Martin, 1996. "Optimizing Multinomial Logit Profit Functions," Management Science, INFORMS, vol. 42(7), pages 992-1003, July.
    8. Luce Brotcorne & Martine Labbé & Patrice Marcotte & Gilles Savard, 2001. "A Bilevel Model for Toll Optimization on a Multicommodity Transportation Network," Transportation Science, INFORMS, vol. 35(4), pages 345-358, November.
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    Cited by:

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    3. Schlicher, Loe & Lurkin, Virginie, 2022. "Stable allocations for choice-based collaborative price setting," European Journal of Operational Research, Elsevier, vol. 302(3), pages 1242-1254.
    4. Knies, Austin & Lorca, Jorge & Melo, Emerson, 2022. "A recursive logit model with choice aversion and its application to transportation networks," Transportation Research Part B: Methodological, Elsevier, vol. 155(C), pages 47-71.

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