A Subsidy Policy to Ensuring Risk-Equity in Railroad Hazmat Transportation Network: A Risk Mitigation Strategy

Abstract

Railroad is one of the primary modes for transporting hazardous materials (hazmat). Given the dangerous nature of the hazmat, risk mitigation in the railroad transportation is the need of the hour. Hence, we explore the idea of equitable distribution of risk in the railroad network. We propose the subsidy policy to be considered by government to induce favourable routings of the hazmat shipments. The government's objective is to achieve risk equity in the network, whereas, the carrier's cost effective approach leads to increased risk in low-cost service-legs. To model this, we formulate the problem as a bi-level mixed integer program. We derive the single level mixed integer linear program (MILP) and test it on the rail infrastructure in midwest United States using state-of-the-art solver CPLEX 12.8.0. The instances with upto 25 shipments on the network are solved efficiently on a local machine. We use high performance computing resource available at Graham cluster of Compute Canada facility to solve the large instances with 50 shipments on the network. We show the effectiveness of the subsidy policy as a risk mitigation tool for the railroad hazmat transportation, and review the efficiency of the solution methodology to solve the MILP for the network. Moreover, the results demonstrate the economic feasibility for the government to allocate the budget for the subsidy.