Iterative VCG-based Mechanism Fosters Cooperation in Multi-Regional Network Design

Abstract: Transportation network design often involves multiple stakeholders with diverse priorities. We consider a system with a hierarchical multi-agent structure, featuring self-optimized subnetwork operators at the lower level and a central organization at the upper level. Independent regional planning can lead to inefficiencies due to the lack of coordination, hindering interregional travel and cross-border infrastructure development, while centralized methods may struggle to align local interests and can be impractical to implement. To support decision making for such a system, we introduce an iterative VCG-based mechanism for multi-regional network design that fosters cooperation among subnetwork operators. By leveraging the Vickery-Clarke-Groves (VCG) mechanism, the framework determines collective investment decisions and the necessary payments from both operators and the central organization to achieve efficient outcomes. A case study on the European Railway System validates the effectiveness of the proposed method, demonstrating significant improvements in overall network performance through enhanced cross-region cooperation.