Transportation Markets According to Game Theory

What is the connection between Game Theory and Transportation Markets? It turns out that there is a close connection. Whether dealing with infrastructure construction (which we Jerusalemites suffer from acutely), public transport operators, or airline companies, the transport market is saturated with interactions between decision makers.

New research from Dean Nicole Adler proposes new applications of Game Theory in the transportation market. 

The first of three main elements when applying Game Theory to market dynamics is the players. A player can be any entity who makes decisions and whose decisions depend on the choices of other players. For example, a player can be a passenger, a car manufacturer, a government authority, or a public transportation operator. 

The second element, Adler explains, is the available strategies of each player in the game. A player can use Pure Strategy—a strategy to be used consistently through every stage in the game (for example: a choice to use only public transportation), or a Mixed Strategy—a combination of different strategies and models.

Schedules, placement of toll booths, subsidies to operators and suppliers are just some of the existing strategies in the transportation market. As if that was not complex enough, responsibilities and decisions of government bodies and regulators also influence the strategies.

The third component of the game is the payoff that each player will get, dependent on both their own and the other players' decisions. For example, reducing the overall travel expenses of the passenger could be a possible payoff of the passengers in the game.

A Game Theoretic model, explains Adler, starts by defining players, their strategies, their interactions, and profit options. The model is all these strategies and interactions, written in the form of Mathematical equations. 

The game itself is the solution of these equations in order to obtain optimization and reach equilibrium in the market, which in turn will be good for all the players. The solution may have negative consequences, like pollution or traffic congestion, but can also have positive ones like mobility, accessibility, or capital.

Sounds like a nice academic exercise? Well, transportation is not what it used to be. The field is undergoing profound technological changes, which provide new and exciting sources of data (e.g., GPS data, data from self-driving cars) and, at the same time, require automated and advanced solutions.  Game Theory sets the language and the tools to start looking for these solutions.

So, fasten your seatbelts and hold on tight, because the road has just begun!