Mixed‐logit network pricing

Mixed‐logit network pricing

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Article ID: iaor2014148
Volume: 57
Issue: 1
Start Page Number: 105
End Page Number: 127
Publication Date: Jan 2014
Journal: Computational Optimization and Applications
Authors: , ,
Keywords: networks
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.

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