A bilevel model of taxation and its application to optimal highway pricing

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.

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