A Bi-Level Model of the Relationship Between Transport and Residential Location

This paper explores a bid-rent network equilibrium model which represents the relationship between transport and residential location. The relationship is examined in terms of the competition of decision-makers for locations. The model discusses difficulties in addressing the characteristics of locations, particularly heterogeneity and indivisibility. A hedonic interpretation is included as a way to resolve these challenges. The model investigates the process in which households make their decisions. This process is shown as an n-player non-cooperative game, following the Nash equilibrium for this game, which is defined as well. The game is accompanied by the systematic interactions between transport and land-use. A mutual adjustment process represents these interactions. The three components are structured by a bi-level mathematical program. The final formulation is interpreted as an oligopolistic Cournot game of which consequence is an approximation of the n-player non-cooperative game. The functional relationship between the decision variables of the upper and the lower levels of the bi-level program produces endogenously-determined transport impedance and locational attractiveness. The endogenous network performance indices of the model are expected to overcome the lack of a realistic network equilibrium description in the existing models. A path-based heuristic algorithm and a simple numerical example are presented. Finally, some concluding remarks are given.

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