Published In

Transportation Science

Document Type

Article

Publication Date

8-1-2007

Subjects

Materials handling, Shipment of goods -- Costs, Traffic flow -- Mathematical models, Transportation problems (Programming)

Abstract

The principal focus of this paper is to study carrier pricing decisions for a type of vehicle routing problems defined in a competitive and dynamic environment. This paper introduces the vehicle routing problem in a competitive environment (VRPCE) as an extension of the traveling-salesman problem with profits (TSPP) to a dynamic competitive auction environment. In the VRPCE, the carrier must estimate the incremental cost of servicing new service requests as they arrive dynamically. The paper presents a rigorous and precise treatment of the sequential pricing and costing problem that a carrier faces in such an environment. The sequential pricing problem presented here is an intrinsic feature of a sequential auction problem. In addition to introducing the formulation of this class of problems and discussing the main sources of difficulty in devising a solution, a simple example is constructed to show that carriers' prices under first-price auction payment rules do not necessarily reflect the cost of servicing transportation requests. An approximate solution approach with a finite rolling horizon is presented and illustrated through numerical experiments, in competition with a static approach with no look-ahead.

Description

This is the publisher's final PDF. The published article is copyrighted © 2007 INFORMS

DOI

10.1287/trsc.1070.0193

Persistent Identifier

http://archives.pdx.edu/ds/psu/8643

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