Integrated Herfindahl–Hirschman Index, Compromise Programming, and ε-Constraint Method For Multicriteria Performance-Based Transportation Budget Allocation

Abstract

This paper introduces a new method for multicriteria performance-based transportation budget allocation. First, the Herfindahl–Hirschman Index (HHI) that has long been used in economics for measuring the level of monopolization in a marketplace is employed to derive the relative weights of multiple non-commensurable transportation performance criteria. Next, a compromise programming (CP) model is formulated to help transform the multicriteria optimization formulation for transportation budget allocation to a single-objective optimization model solvable by minimizing the Chebyshev distance to the ideal levels of performance targets associated with individual performance criteria. Finally, the ε-constraint trade-off analysis method is incorporated into the combined use of HHI and CP framework to iteratively derive the optimal decision outcome. Six-year data on candidate investment projects proposed for a U.S. state-maintained rural Interstate highway system along with data details of the available budget is used in a computational study for method application. Comparative analysis of decision outcomes is conducted with the STEP method for cross validation. It has revealed that the proposed HHI-CP ε-constraint method outperforms the existing method and can be adopted by state and local transportation agencies to carry out effective budget allocation.