A bilevel model of taxation and its application to optimal toll setting

LOTITO P.A

Santiago de Chile

Conferencia; FLACAM VII, French-Latin American Congress on Applied Mathematics; 2005

Centro de Modelizacion Matematica, Universidad Nacional de Chile

A BILEVEL MODEL OF TAXATION AND ITS APPLICATION TO OPTIMAL PRICING OF CONGESTED HIGHWAYS Pablo A. LOTITOCONICET, Instituto de Matemática Beppo LeviUniversidad Nacional de Rosario, Argentina In this paper we investigate the effects of taxation in the total profit of the highway operator considering that users react to tolls following the Wardrop principle. The optimal toll setting problem has been studied by many authors where öptimal" means maximum consumer surplus or social welfare. These models have the property that the bi-level programming problem obtained belongs to the class of bi-level problems that have efficient algorithms. When the upper level problem is the maximization of the operator profit (toll times flow) the bi-level programming problem does not have an efficient algorithm. Assuming that the travel-time functions are linear we study analytically the problem focusing in the search of a global solution and showing the difficulties that this problem can present. The results obtained allow us to improve an existing heuristic and to propose a new algorithm for which we give numerical results.