Price-based regulation of oligopolistic markets under discrete choice models of demand

We propose a framework to find optimal price-based policies to regulate markets characterized by oligopolistic competition and in which consumers make a discrete choice among a finite set of alternatives. The framework accommodates general discrete choice models available in the literature in order to capture heterogeneous consumer behavior. In our work, consumers are utility maximizers and are modeled according to random utility theory. Suppliers are modeled as profit maximizers, according to the traditional microeconomic treatment. Market competition is modeled as a non-cooperative game, for which an approximate equilibrium solution is sought. Finally, the regulator can affect the behavior of all other agents by giving subsidies or imposing taxes to consumers. In transport markets, economic instruments might target specific alternatives, to reduce externalities such as congestion or emissions, or specific segments of the population, to achieve social welfare objectives. In public policy, different agents have different individual or social objectives, possibly conflicting, which must be taken into account within a social welfare function. We present a mixed integer optimization model to find optimal policies subject to supplier profit maximization and consumer utility maximization constraints. Then, we propose a model-based heuristic approach based on the fixed-point iteration algorithm that finds an approximate equilibrium solution for the market. Numerical experiments on an intercity travel case study show how the regulator can optimize its decisions under different scenarios.

     

An analysis of destination choice for opaque airline products using multidimensional binary logit models

We investigate how customers respond to an opaque airline product offered by a European carrier. In this opaque product design, customers are randomly assigned to travel to one of approximately ten destinations; however, for a fee they may exclude one or more destinations from the choice set (or a particular package design) prior to learning which destination they will travel to. We use a multidimensional binary logit model to predict the probability that one or more alternatives will be chosen by a customer. Results show that customers are more likely to pay to exclude destinations located close to the origin airport and destinations that speak the same language as the origin airport. Length of stay, cost of living at the destination, and measures of destination attractiveness are also found to be significant predictors for some package designs. Based on these findings, we offer general recommendations for how to design opaque packages for airline customers.     

Sampling of alternatives for route choice modeling

This paper presents a new paradigm for choice set generation in the context of route choice model estimation. We assume that the choice sets contain all paths connecting each origin–destination pair. Although this is behaviorally questionable, we make this assumption in order to avoid bias in the econometric model. These sets are in general impossible to generate explicitly. Therefore, we propose an importance sampling approach to generate subsets of paths suitable for model estimation. Using only a subset of alternatives requires the path utilities to be corrected according to the sampling protocol in order to obtain unbiased parameter estimates. We derive such a sampling correction for the proposed algorithm.Estimating models based on samples of alternatives is straightforward for some types of models, in particular the multinomial logit (MNL) model. In order to apply MNL for route choice, the utilities should also be corrected to account for the correlation using, for instance, a path size (PS) formulation. We argue that the PS attribute should be computed based on the full choice set. Again, this is not feasible in general, and we propose a new version of the PS attribute derived from the sampling protocol, called Expanded PS.Numerical results based on synthetic data show that models including a sampling correction are remarkably better than the ones that do not. Moreover, the Expanded PS shows good results and outperforms models with the original PS formulation.     

Design and analysis of control strategies for pedestrian flows

Transportation - Exploiting the full potential of pedestrian infrastructure is becoming critical in many environments which cannot be easily expanded to cope with the increasing pedestrian demand....     

An empirical comparison of travel choice models that capture preferences for compromise alternatives

Compromise alternatives have an intermediate performance on each or most attributes rather than having a poor performance on some attributes and a strong performance on others. The relative popularity of compromise alternatives among decision-makers has been convincingly established in a wide range of decision contexts, while being largely ignored in travel behavior research. We discuss three (travel) choice models that capture a potential preference for compromise alternatives. One approach, which is introduced in this paper, involves the construction of a so-called compromise variable which indicates to what extent (i.e., on how many attributes) a given alternative is a compromise alternative in its choice set. Another approach consists of the recently introduced random regret-model form, where the popularity of compromise alternatives emerges endogenously from the regret minimization-based decision rule. A third approach consists of the contextual concavity model, which is known for favoring compromise alternatives by means of a locally concave utility function. Estimation results on a stated route choice dataset show that, in terms of model fit and predictive ability, the contextual concavity and random regret models appear to perform better than the model that contains an added compromise variable.     

Operational route choice methodologies for practical applications

This paper focuses on the application of tractable route choice models and presents a set of methods for deriving relevant disaggregate and aggregate route choice indicators, namely link and route flows. Tractability is achieved at the disaggregate level by the recursive logit model and at the aggregate level by the mental representation item (\(\mathrm {MRI}\)) approach. These two approaches are analyzed here, and extensions of the \({\mathrm {MRI}}\) approach are presented. The analysis elaborates on the features of each model and allows to draw insights into the use of a specific model, depending on the needs of the application and the data availability. The performance of the two models is tested on real data. The results demonstrate the validity of the \({\mathrm {MRI}}\) model that is intended for aggregate analysis.

     

Multi‐objective airport gate assignment problem in planning and operations

We consider the assignment of gates to arriving and departing flights at a large hub airport. This problem is highly complex even in planning stage when all flight arrivals and departures are assumed to be known precisely in advance. There are various considerations that are involved while assigning gates to incoming and outgoing flights (such a flight pair for the same aircraft is called a turn) at an airport. Different gates have restrictions, such as adjacency, last‐in first‐out gates and towing requirements, which are known from the structure and layout of the airport. Some of the cost components in the objective function of the basic assignment model include notional penalty for not being able to assign a gate to an aircraft, penalty for the cost of towing an aircraft with a long layover, and penalty for not assigning preferred gates to certain turns. One of the major contributions of this paper is to provide mathematical model for all these complex constraints that are observed at a real airport. Further, we study the problem in both planning and operations modes simultaneously, and such an attempt is, perhaps, unique and unprecedented. For planning mode, we sequentially introduce new additional objectives to our gate assignment problem that have not been studied in the literature so far—(i) maximization of passenger connection revenues, (ii) minimization of zone usage costs, and (iii) maximization of gate plan robustness—and include them to the model along with the relevant constraints. For operations mode, the main objectives studied in this paper are recovery of schedule by minimizing schedule variations and maintaining feasibility by minimal retiming in the event of major disruptions. Additionally, the operations mode models must have very, very short run times of the order of a few seconds. These models are then applied to a functional airline at one of its most congested hubs. Implementation is carried out using Optimization Programming Language, and computational results for actual data sets are reported. For the planning mode, analyst perception of weights for the different objectives in the multi‐objective model is used wherever actual dollar value of the objective coefficient is not available. The results are also reported for large, reasonable changes in objective function coefficients. For the operations mode, flight delays are simulated, and the performance of the model is studied. The final results indicate that it is possible to apply this model to even large real‐life problems instances to optimality within short run times with clever formulation of conventional continuous time assignment model. Copyright © 2013 John Wiley & Sons, Ltd.