Optimization for Multiclass Residential Location Models with Congestible Transportation Networks

Abstract

There has been extensive research on the optimal design of road congestion pricing schemes based on traffic network equilibrium models. Since travel demands are closely related to the locations of workplace and residence, it is of both theoretical and practical importance to extend the optimization approach to treat location choices as well as travel route choices. This paper addresses the problem of optimal location of housing supply and transportation network pricing in an integrated location and transportation model with heterogeneous households that have different values of travel time. In the model, housing exhibits external economies and diseconomies of scale, depending on the population density in residential zones. It is shown that in such a model the marginal cost pricing principle applied to internalize these externalities in general results in local optima of social surplus. Optimization algorithms based on sensitivity analysis are proposed to find combinations of housing supply patterns and road tolls that optimize social surplus under various conditions. A numerical example is given to illustrate the proposed method. The potential policy implications of the optimization approach are examined and compared with that of the marginal cost pricing principle.