Joint traffic management and logistics optimization: a game theoretical approach

Traffic Management and Logistics optimization, when considered separately, are well-known problems which have been studied for several years. There is in fact for each of these problems a very large literature rich with different methodologies, mathematical models and algorithmic solutions. Traffic Management is a special case of the Network Design Problem (NDP), which is usually formulated in literature as a bi-level optimization problem. Logistics optimization, on the other hand, deals with the distribution of goods and materials between suppliers, manufacturers and retailers. Concerns such as fleet composition, product handling, inventory management and routing are taken into account to formulate the problems. While the problems have been addressed separately, no attention has been devoted yet to exploring the interactions between the two players. We believe this to be of considerable importance, since partial or incomplete knowledge on one another’s decisions might yield sub-optimality for either or both of them. As a first step towards exploring these interactions in greater detail, we propose a framework integrating both the Traffic Management and the Logistics optimization problems in one, comprehensive model by means of a game theoretical approach. Once the model is specified, we perform numerical tests in order to assess the impact of the two players on each other