Optimal Taxes and Subsidies for Sustainable City Logistics: A Multi-Agency Bilevel Game-Theoretic Framework

Abstract

Urban freight transport contributes substantially to congestion, pollution, and inefficiency in cities. To mitigate these adverse effects, policymakers are increasingly exploring incentive based mechanisms that promote sustainable transportation modes, such as inland waterways and rail-based scheduled services. The effectiveness of such policies critically depends on the strategic interactions among multiple decision making agencies. This study develops a multi agency game theoretic bilevel framework for sustainable city logistics involving transportation authorities, logistics service providers (LSPs), and end customers. The authority determines tax and subsidy policies under a budget constraint. LSPs respond by optimizing mode choice and pricing strategies, while customers select services through a utility maximizing logit model. A case study of Amsterdam compares three feasible implementation strategies and evaluates their effectiveness in improving system efficiency, promoting sustainable mode adoption, and balancing policy feasibility with economic performance.