Changhyun Kwon ::: Research

Research

If we knew what it was we were doing, it would not be called research, would it? - Albert Einstein

Research Interests

Methodology:
- Nonlinear Optimization, Infinite Dimensional Optimization, Optimal Control
- Variational Inequalities, Game Theory, Equilibrium Programming
Application:
- Transportation and Traffic Theory, Congestion Pricing, Hazardous Material Transportation
- Revenue Management, Dynamic Pricing, e-Commerce, Online Advertisement

Dr. Kwon's research has been supported by various funding agencies including the National Science Foundation, the U.S. Department of Transportation, and the Embassy of Canada in Washington D.C.

NSF sponsored research in hazardous materials transportation

Journals and Conferences

A list of academic journals that are relevant to my research.
A collection of conferences where my works were presented. (Some links may not work; The list has not been updated for a while.)

Grants

1.: (PI) “Towards Socially and Economically Sustainable Urban Developments”, U.S. Department of Transportation through University Transportation Research Center, Region II, Research Initiative, co-Is: Jiyoung Park (UB), Qian Wang (UB), 12/23/2011 - 09/30/2012
2.: (PI) “Processing Area Improvement Initiative”, Goodwill Industries of WNY, Inc. through the Center for Industrial Effectiveness, 11/30/2011 - 5/30/2012
3.: (PI) “Collaborative Research: Regulating Hazardous Materials Transportation by Multi-Objective Dual Toll Pricing”, National Science Foundation, co-PIs: Rajan Batta (UB) and Young-Jun Son (U Arizona), 09/01/2011 - 08/31/2014 [CMMI-1068585]
4.: (PI) “Robust Routing for Hazardous Materials Transportation with Conditional Value-at-Risk on Time-Dependent Networks”, U.S. Department of Transportation through University Transportation Research Center, Region II, Faculty Development Minigrants, 07/01/2011 - 09/30/2012 [49111-07-23]
5.: (PI) “Food Service Efficiency & Capacity Analysis Study/Assessment”, Efficient Schools Team, LLC., Buffalo, NY, through The Center for Industrial Effectiveness, 03/30/2011 - 09/30/2011
6.: (PI) “Economic Implications of the Canada-US Border Bridges: Applying a Transportation-Combined Multiregional Input-Output Model for Canada and the U.S.”, Embassy of Canada in Washington, D.C., co-PI: Jiyoung Park (UB), 03/01/2011 - 02/28/2012 [link]
7.: The Canadian-American Studies Committee, Fall 2010 Grant Competition, with Jiyoung Park (UB), 2010
8.: Multiregional Policy Analysis LLC, 2010.

Publications

Working Papers

1.: Toumazis, I.^*, R. Batta and C. Kwon, “Value-at-Risk and Conditional Value-at-Risk Minimization for Hazardous Materials Routing”, in review for publication as a handbook chapter [PDF]
2.: Ahmed, M.T.^*, J. Zhuang and C. Kwon, “A Game between a Government and a Tobacco Manufacturer”, [PDF] [show abstract]

Rice is the staple food of nearly half of the population of the world, most of whom live in developing countries. Ensuring domestic supply of rice from outside sources is difficult for developing countries as less than 5% of total world's production is available for international trade. Hence, in order to ensure domestic food security, e.g., food availability and access, governments provide subsidy in agriculture. In many occasions, public money used for subsidy goes toward promoting undesirable crops like tobacco. Although the strategic interaction between governments and manufacturers is critical, it has not been studied in the literature. This study fills this gap by considering a game between a government (of a developing country) and a tobacco manufacturer in which the government decides on a mix of subsidies and the tobacco manufacturer decides on declaring a purchasing price of tobacco. We provide a numerical study to show that controlling the output harvest price is more effective in reaching the desired end result for both the government and the tobacco manufacturer. A subsidy in fertilizer results in the measurable increase in the government spending but does not have significant effect in reaching the production target. The fertilizer subsidy should be provided only when the output price is too high to be affordable for the population.
3.: Kang, Y.^*, R. Batta and C. Kwon, “Value-at-Risk Model for Hazardous Material Transportation” [PDF] [show abstract]

This paper introduces a Value-at-Risk (VaR) model to generate route choices for a hazmat shipment based on a specified risk confidence level. The objective is to determine a route which minimizes the likelihood that the risk will be greater than a set threshold. Several properties of the VaR model are established. An exact solution procedure is proposed and tested to solve the single-trip problem. To test the applicability of the approach, routes obtained from the VaR model are compared with those obtained from other hazmat objectives, on a numerical example as well as a hazmat routing scenario derived from the Albany district of New York State. Depending on the choice of the confidence level, the VaR model gives different paths from which we conclude that the route choice is a function of the level of risk tolerance of the decision-maker. Further refinements of the VaR model are also discussed.
4.: Kang, Y.^*, R. Batta and C. Kwon, “Generalized Route Planning Model for Hazardous Material Transportation with VaR and Equity Considerations” [PDF] [show abstract]

In an earlier paper, Kang, Batta, and Kwon (2011) introduced the Value-at-Risk (VaR) framework and applied it to the case of routing a single hazmat trip. In this paper, we develop upon this work in two important ways. First, we show how to apply the VaR concept to a more realistic multi-trip multi-hazmat type framework which aims at determining routes that minimize the global VaR value while satisfying equity constraints. Second, we show how to embed the solution algorithm for the single hazmat trip problem into a Lagrangian relaxation framework to obtain an efficient solution method for this general case. We test our computational experience based on a real-life hazmat routing scenario in the Albany district of New York State. Our results indicate that one can achieve a high degree of risk dispersion while controlling the VaR value within the desired confidence level.
5.: Kwon, C., T. Lee, P. Berglund^*, “Robust Shortest Path Problems with Two Uncertain Multiplicative Cost Coefficients” [PDF] [show abstract]

We consider a robust shortest path problem when the cost coefficient is a multiplication of two uncertain parameters. We first show that the robust problem can be solved by a dual variable enumeration with with shortest path problems as subproblems. We propose another path enumeration solution approach using a $K$-shortest paths finding algorithm that may be efficient in many real cases. An application in hazardous materials transportation is discussed and the solution methods are illustrated by numerical examples.
6.: Ahmed, M. T.^* and C. Kwon, “Optimal Contract Problems in Online Advertising with Risk Considerations” [PDF] [show abstract]

In this paper, we study optimal contract problems for online display advertisements with pay-per-view pricing scheme. We first provide and analyze a single contract model, which is shown to be equivalent to the newsvendor problem. We then consider a stochastic optimization problem with two different contracts and show that no mixed contract is optimal for risk-neutral publisher. However, we show that a mixed contract strategy may be optimal when we consider the risk attitude of the publisher. Numerical experiments illustrate the change of optimal strategy for different risk levels.

(* = Dr. Kwon’s students)

Journal Articles (Published or To Appear)

1.: Ahmed, M.T.^* , and C. Kwon (2012), “Pricing Game of Online Display Advertisement Publishers”, European Journal of Operational Research, 219, 477-487. [DOI] [PDF] [show abstract]

We consider an online display advertisement publisher who maximizes the revenue by optimal pricing in an oligopoly setting. Each publisher interacts with others though setting cost-perimpression (CPM) that affects the demand for everyone. Using the pseudoconcavity of the objective function, we study the best response of the publisher while her strategy space changes. We also consider the sensitivity of the publisher while other publishers changes their CPM. In both cases, the best response of the publisher depends entirely on her current best response CPM. We provide an algorithm for finding the equilibrium and illustrate by numerical examples.
2.: Jung, T.^* and C. Kwon (2011), “Retailer-Supplier Matching: an Application of the Deferred Acceptance Algorithm” International Journal of Services Operations and Informatics, 6(3), 248–258. [DOI] [PDF] [show abstract]

In this paper, we apply matching theory to supply chain coordination. We present mathematical optimization models similar to the newsvendor problem to provide appropriate conditions for retailer-supplier matching. In particular, our matching algorithm, compared to the general matching theory, has uniquely been affected by contract sizes and ordering sequences. We also study that our matching application guarantees stable and optimal outcomes. Numerical examples with various parameter settings are provided to test the feasibility of the matching algorithms. We find that we can avoid the worst matching case when we use the proposed matching algorithms.
3.: Srinivasan, A.^* and C. Kwon (2012), “Operations of Online Advertising Services and Publisher’s Option”, Journal of the Operational Research Society, 63, 674–682. [DOI] [PDF] [show abstract]

We analyse the use of options for online advertisement publishers. By providing a discount or rewards to advertisers, publishers can utilize their uncertain service capacity, page-views, more efficiently. We use Generalized Nash Bargaining to study the feasibility of the option contract and solve for an optimal value for the option price. We compare the revenues and benefits from advertisements under the option contract, with those without the options using numerical studies. We also study the impact of pricing and other components in the game on the optimal option price, the publisher's revenues, and the advertiser's benefits from the advertisements.
4.: Chung, B.D., J. Li, T. Yao, C. Kwon and T. L. Friesz (2012), “Demand Learning and Dynamic Pricing under Competition in a State-Space Framework ”, IEEE Transactions on Engineering Management, 59(2), 240–249. [DOI] [PDF] [show abstract]

In this paper, we propose a revenue optimization framework integrating demand learning and dynamic pricing for firms in monopoly or oligopoly markets. We introduce a state-space model for this revenue management problem, which incorporates game-theoretic demand dynamics and nonparametric techniques for estimating the evolution of underlying state variables. Under this framework, stringent model assumptions are removed. We develop a new demand learning algorithm using Markov chain Monte Carlo methods to estimate model parameters, unobserved state variables, and functional coefficients in the nonparametric part. Based on these estimates, future price sensitivities can be predicted, and the optimal pricing policy for the next planning period is obtained. To test the performance of demand learning strategies, we solve a monopoly firm's revenue maximizing problem in simulation studies. We then extend this paradigm to dynamic competition, where the problem is formulated as a differential variational inequality. Numerical examples show that our demand learning algorithm is efficient and robust.
5.: Wang, J.^*, Y. Kang^*, C. Kwon and R. Batta (2012), “Dual Toll Pricing for Hazardous Material Transport with Linear Delay”, Networks and Spatial Economics, 12, 147–165. [DOI] [PDF] [show abstract]

In this paper, we propose a dual toll pricing method to mitigate risk of hazardous materials (hazmat) transportation. We aim to simultaneously control both regular and hazmat vehicles to reduce the risk. In our model, we incorporate a new risk measure to consider duration-population-frequency of hazmat exposure. We first formulate the model as a Mathematical Program with Equilibrium Constraints (MPEC). Then we decompose the MPEC formulation into first-stage and second-stage problems. Separate methods are developed to solve each stage. A numerical example is provided and possible extensions are discussed.
6.: Friesz, T. L., T. I. Kim, C. Kwon and M. A. Rigdon (2011), “Approximate Network Loading and Dual Time Scale Dynamic User Equilibrium”, Transportation Research Part B, 45(1), 176-207. [DOI] [PDF] [show abstract]

In this paper we present a dual-time-scale formulation of dynamic user equilibrium (DUE) with demand evolution. Our formulation belongs to the problem class that Pang and Stewart (2008) refer to as differential variational inequalities. It combines the within-day time scale for which route and departure time choices fluctuate in continuous time with the day-to-day time scale for which demand evolves in discrete time steps. Our formulation is consistent with the often told story that drivers adjust their travel demands at the end of every day based on their congestion experience during one or more previous days. We show that analysis of the within-day assignment model is tremendously simplified by expressing dynamic user equilibrium as a differential variational inequality. We also show there is a class of day-to-day demand growth models that allow the dual-time-scale formulation to be decomposed by time-stepping to yield a sequence of continuous time, single-day, dynamic user equilibrium problems. To solve the single-day DUE problems arising during time-stepping, it is necessary to repeatedly solve a dynamic network loading problem. We observe that the network loading phase of DUE computation generally constitutes a differential algebraic equation (DAE) system, and we show that the DAE system for network loading based on the link delay model (LDM) of Friesz et al. (1993) may be approximated by a system of ordinary differential equations (ODEs). That system of ODEs, as we demonstrate, may be efficiently solved using traditional numerical methods for such problems. To compute an actual dynamic user equilibrium, we introduce a continuous time fixed-point algorithm and prove its convergence for effective path delay operators that allow a limited type of nonmonotone path delay. We show that our DUE algorithm is compatible with network loading based on the LDM and the cell transmission model (CTM) due to Daganzo (1995). We provide a numerical example based on the much studied Sioux Falls network.
7.: Moon. Y. and C. Kwon (2011), “Online Advertisement Service Pricing and an Option”, Electronic Commerce Research and Applications, 10(1), 38-48. [DOI] [PDF] [show abstract]

For the Internet advertisement market, we consider a contract problem between advertisers and publishers. Among several ways of pricing online advertisements, the methods based on cost-per-impression (CPM) and cost-per-click (CPC) are the two most popular. The CPC fee is proportional to the click-through rate (CTR), which is uncertain and makes decisions of advertisers and publishers difficult. In this paper, we suggest a hybrid pricing scheme: advertisers pay the minimum of CPM and CPC fees by purchasing an option from publishers. To determine the option price, we consider a Nash bargaining game for negotiation between an advertiser and a publisher and provide the solution. Further, we show that such option contracts will help the advertiser avoid high cost and the publisher generate more revenue. The option contract will also improve the contract feasibility, compared to CPM and CPC.
8.: Kwon, C. (2011), “Single-Period Balancing of Pay-Per-Click and Pay-Per-View Online Display Advertisements”, Journal of Revenue and Pricing Management, 10(3), 261-270. [DOI] [PDF] [show abstract]

In this article, we study a balancing problem of web publishers for pay-per-view and pay-per-click contracts for online display advertising. Considering the details of contracts, we refine prior research results on the recommendation of optimal strategies. We examine the problem by formalizing a simple stochastic optimization problem for a single period of advertising contracts. We investigate how pricing and other contract components will affect the optimal display strategies analytically and numerically.
9.: Kwon, C., T. L. Friesz, R. Mookherjee, T. Yao and B. Feng (2009), “Non-cooperative Competition Among Revenue Maximizing Service Providers with Demand Learning”, European Journal of Operational Research, 197(3), 981-996. [DOI] [PDF] [show abstract]

This paper recognizes that in many decision environments in which revenue optimization is attempted, an actual demand curve and its parameters are generally unobservable. Herein, we describe the dynamics of demand as a continuous time differential equation based on an evolutionary game theory perspective. We then observe realized sales data to obtain estimates of parameters that govern the evolution of demand; these are refined on a discrete time scale. The resulting model takes the form of a differential variational inequality. We present an algorithm based on a gap function for the differential variational inequality and report its numerical performance for an example revenue optimization problem.
10.: Kwon, C. and T. L. Friesz (2008), “Valuation of American Options by the Gradient Projection Method”, Applied Mathematics and Computation, 206(1), 380-388. [DOI] [PDF] [show abstract]

We study an equivalent optimization problem with an inequality constraint and boundary conditions, whose necessary condition for optimality is the variational inequality presentation of American options. To solve the problem, we use the gradient projection method, with discretizations both in time and space. We tested the algorithm and compared with the projective successive over-relaxation method.
11.: Friesz, T. L. and C. Kwon (2008), “Supply Chain Design in Perfect Competition”, International Journal of Services Operations and Informatics, 3(3/4), 340-356. [DOI] [PDF] [show abstract]

In this paper, we apply the theory of optimal control and theory of traffic assignment for supply chain design in perfect competition. We model the time staging and generalised routing of input factors needed for production by a firm. The production process will typically involve several stages, and as such is described by paths through a production network whose nodes are the various stages of production. We develop an algorithm and test it for a small numerical example.
12.: Miller, T. C., T. L. Friesz, R. L. Tobin and C. Kwon (2007), “Reaction Function Based Dynamic Location Modeling in Stackelberg-Nash-Cournot Competition”, Networks and Spatial Economics, 7(1), 77-97. [DOI] [PDF] [show abstract]

We formulate a dynamic facility location model for a firm locating on a discrete network. It is assumed that this locating firm will act as the leader firm in an industry characterized by Stackelberg leader-follower competition. The firm's I competitors are assumed to act as Cournot firms and are each assumed to operate under the assumption of zero conjectural variation with respect to their I-1 Cournot competitors. Using sensitivity analysis of variational inequalities within a hierachical mathematical programming approach, we develop reaction function based dynamic models to optimize the Stackelberg firm's location decision. In the second half of this paper, we use these models to illustrate through a numerical example the insights yielded by our approach.

Edited Books

1.: Batta, R. and C. Kwon, “Handbook of OR/MS Models in Hazardous Materials Transportation”, Springer (In Progress)

Refereed Proceedings

1.: C. Kwon (2011), “Conditional Value-at-Risk Model for Hazardous Materials Transportation”, in Proceedings of the 2011 Winter Simulation Conference, S. Jain, R. R. Creasey, J. Himmelspach, K. P. White, and M. Fu, eds. pp. 1708-1714 [show abstract]

This paper investigates how the conditional value-at-risk (CVaR) can be used to mitigate risk in hazardous materials (hazmat) transportation. Routing hazmat must consider accident probabilities and accident consequences that depend on the hazmat types and route choices. This paper proposes a new method for mitigating risk based on CVaR measure. While the CVaR model is popularly used in financial portfolio optimization problems, its application in hazmat transportation is new. A computational method for determining the optimal CVaR route is proposed and illustrated by a case study in the road network surrounding Albany, NY.
2.: Jeong, B., C. Kwon, Y.S. Zhang, and S. Yang (2010), “Evaluating the Research Performance of a R&D Program: an Application of DEA”, Proceedings of the International Multi-Conference of Engineers and Computer Scientists 2010 Vol III. [PDF]
3.: Friesz, T. L., M. A. Rigdon and C. Kwon (2008), “A New Gradient Projection Algorithm for the Dynamic User Equilibrium Problem”, International Symposium on Dynamic Traffic Assignment 2008
4.: Friesz, T. L., C. Kwon and M. A. Rigdon (2007), “A Model of Competition in Service Management”, Proceedings of 2007 IEEE/INFORMS International Conference on Service Operations and Logistics, and Informatics [DOI]
5.: Friesz, T. L., C. Kwon and R. Mookherjee (2007), “A Computable Theory of Dynamic Congestion Pricing”, In: Transportation and Traffic Theory 2007: Papers selected for presentation at ISTTT17, a peer reviewed series since 1959, R. E. Allsop, M. G. H. Bell and B. G. Heydecker (Eds.), pp. 1-26. [PDF] [show abstract]

In this paper we present a theory of dynamic congestion pricing for the day-to-day as well as the within-day time scales. The equilibrium design problem emphasized herein takes the form of an MPEC, which we call the Dynamic Optimal Toll Problem with Equilibrium Constraints, or DOTPEC. The DOPTEC formulation we employ recalls an important earlier result that allows the equilibrium design problem to be stated as a single level problem, a result which is surprisingly little known. The DOPTEC maintains the usual design objective of minimizing the system travel cost by appropriate toll pricing. We describe how an infnite dimensional mathematical programming perspective may be employed to create an algorithm for the DOTPEC. A numerical example is provided.
6.: Friesz, T. L., C. Kwon, A. Chow and B. Heydecker (2007), “A Dynamic Efficient Toll Problem”, The Sixth Triennial Symposium on Transportation Analysis (TRISTAN VI)
7.: Friesz, T. L., R. Mookherjee and C. Kwon (2006), “Dynamic Non-cooperative Games as a Foundation for Modeling Dynamic User Equilibrium”, The First International Symposium on Dynamic Traffic Assignment [PDF]
8.: Friesz, T. L., C. Kwon and R. Mookherjee (2006), “A Computable Theory of Dynamic Congestion Pricing”, The First International Symposium on Dynamic Traffic Assignment

Book Chapters

1.: Friesz, T. L., T. I. Kim, C. Kwon and M. A. Rigdon (2010), “Computing Dual Time Scale Dynamic User Equilibria”, in New Developments in Transport Planning: Advances in Dynamic Traffic Assignment (Eds.: C. M. J. Tampere, F. Viti and L. H. Immers), Edward Elgar Publishing. [LINK]
2.: Friesz, T. L., C. Kwon and D. Bernstein (2009), “Evolutionary and Preferential Attachment Models of Demand Growth”, in Complexity and Spatial Networks: In Search of Simplicity (Eds.: Aura Reggiani and Roberto Patuelli), Springer-Verlag. [LINK] [DOI]
3.: Friesz, T. L., C. Kwon and D. Bernstein (2007), “Analytical Dynamic Traffic Assignment Model" in Handbook of Transport Modelling 2nd Edition (Eds.: D. A. Hensher and K. J. Button), Elsevier. [LINK]
4.: Friesz, T. L. and C. Kwon (2007), “Strategic Freight Network Planning Models and a Dynamic Oligopolistic Urban Freight Network" in Handbook of Transport Modelling 2nd Edition (Eds.: D. A. Hensher and K. J. Button), Elsevier. [LINK]