Tradable credit scheme design with transaction cost and equity constraint

Abstract In this paper, we study the tradable credit scheme design problem considering transaction cost and social equity. Heterogeneous users with different value of times (VOT) and elastic demand are assumed. The credit scheme is characterized by user anonymous initial endowment and link-specific credit charge, and incorporates transaction cost, which is associated with trading volume and independent of credit price. The equilibrium problem is formulated as a variational inequality (VI) problem and the existence and uniqueness of its solution are guaranteed. Based on the VI formulation, a credit scheme design problem with equity constraint is proposed, aimed at maximizing the total social welfare. Based on the results from the example network, the impacts of transaction cost under various equity constraints are investigated. It is found that the transaction cost can negatively affect travel disutility for low-VOT users, and the imposition of equity constraint can address the inequity.