Edge Pricing of Multicommodity Networks for Selfish Users with Elastic Demands

We examine how to induce selfish heterogeneous users in a multicommodity network to reach an equilibrium that minimizes the social cost. In the absence of centralized coordination, we use the classical method of imposing appropriate taxes (tolls) on the edges of the network. We significantly generalize previous work (Yang and Huang in Transp. Res. Part B 38:1–15, [2004]; Karakostas and Kolliopoulos in Proceedings of the 45th Annual IEEE Symposium on Foundations of Computer Science, pp. 268–276, [2004]; Fleischer et al. in Proceedings of the 45th Annual IEEE Symposium on Foundations of Computer Science, pp. 277–285, [2004]) by allowing user demands to be elastic. In this setting the demand of a user is not fixed a priori but it is a function of the routing cost experienced, a most natural assumption in traffic and data networks. Research supported by MITACS and a NSERC Discovery grant.