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A Bilevel Model of Taxation and Its Application to Optimal Highway Pricing

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  • Martine Labbé

    (Institut de Statistique et Recherche Opérationnelle, Université Libre de Bruxelles, Boulevard du Triomphe, CP 210/01, B-1050 Bruxelles, Belgique)

  • Patrice Marcotte

    (Centre de recherche sur les Transports and Département d'Informatique et Recherche Opérationnelle, Université de Montréal, CP 6128, Succursale Centre-Ville, Montréal, Québec, Canada H3C 3J7)

  • Gilles Savard

    (GERAD and Département de mathématiques et génie industriel, Ecole Polytechnique de Montréal, CP 6079, Succursale Centre-Ville, Montréal, Québec, Canada H3C 3A7)

Abstract

We consider a bilevel model where the leader wants to maximize revenues from a taxation scheme, while the follower rationally reacts to those tax levels. We focus our attention on the special case of a toll-setting problem defined on a multicommodity transportation network. We show that the general problem is NP-complete, while particular instances are polynomially solvable. Numerical examples are given.

Suggested Citation

  • 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.
    • Handle: RePEc:inm:ormnsc:v:44:y:1998:i:12-part-1:p:1608-1622
    DOI: 10.1287/mnsc.44.12.1608
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    References listed on IDEAS

    as
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    3. van Ackere, Ann, 1993. "The principal/agent paradigm: Its relevance to various functional fields," European Journal of Operational Research, Elsevier, vol. 70(1), pages 83-103, October.
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    Keywords

    Pricing; Networks; Bilevel;
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