Co-investment with Payoff Sharing Benefit Operators and Users in Network Design

Network-based complex systems are inherently interconnected, with the design and performance of subnetworks being interdependent. However, the decisions of self-interested operators may lead to suboptimal outcomes for users. In this paper, we consider the question of what cooperative mechanisms can benefit both operators and users simultaneously. We address this question in a game theoretical setting, integrating both non-cooperative and cooperative game theory. During the non-cooperative stage, subnetwork decision-makers strategically design their local networks. In the cooperative stage, the co-investment mechanism and the payoff-sharing mechanism are developed to enlarge collective benefits and fairly distribute them. A case study of the Sioux Falls network is conducted to demonstrate the efficiency of the proposed framework. The impact of this interactive network design on environmental sustainability, social welfare and economic efficiency is evaluated, along with an examination of scenarios involving regions with heterogeneous characteristics.