A Game-Theoretic Approach for Regulating Hazmat Transportation

Abstract

In this paper, we study a novel toll setting policy to regulate hazardous material (hazmat) transportation, where the regulator (e.g., a government authority) aims at minimizing not only the network total risk but also at spreading the risk in an equitable way over a given road network. The idea is to use a toll setting policy to discourage carriers transporting hazmat from overloading portions of the network with the consequent increase of the risk exposure of the population involved. Specifically, we assume that the toll paid by a carrier on a network link depends on the usage of that link by all carriers. Therefore the route choices of each carrier depend on the other carrier’s choices, and the tolls deter the carriers from using links with a high total risk. The resulting model is a mathematical programming with equilibrium constraints (MPEC) problem, where the inner problem is a Nash equilibrium problem (game) having as players the carriers, each one wishing to minimize his or her travel cost (including tolls); the outer problem is addressed by the government authority, whose aim is finding the link tolls that induce the carriers to choose route plans that minimize both the network total risk and the maximum link total risk among the network links (to address risk equity). To guarantee the stability of the solution, we study conditions for the existence and uniqueness of the Nash equilibrium, and propose a local search heuristic for the MPEC problem. Computational results are carried out on a real road network, comparing the performance of our toll setting policy with the toll setting approach proposed in the literature.