The dynamic multilevel assignment problem as a stochastic extremal process

This paper considers the multilevel assignment problem (i.e. the assignment problem where the supply alternatives are ranked in hierarchical levels) under the assumption that the utility components for each pairwise matching are stochastic. A dynamic version of the multilevel stochastic assignment model is developed, where both demand and supply evaluate alternatives according to a stochastic extremal process, i.e. a process where the maximum of a sequence of random variables is taken into account. The probability distributions of the random variables which describe the joint dynamic behaviour of demand and supply are found. It is also shown that the assignment probabilities assume the structure of a nested-logit model.