Transportation service procurement in periodic sealed double auctions with stochastic demand and supply

This paper presents a double auction model to study transportation service procurement (TSP) in a dynamic single-lane transportation environment. Although this paper is motivated by a third-party logistics e-marketplace, the underlying model is applicable in the general bilateral exchange contexts. We first address TSP in a transportation spot market with stochastic but balanced or "symmetric" demand and supply. A periodic sealed double auction (PSDA) is proposed for TSP. Using a packing approach that considers possible bids and/or asks in an integral manner, we then devise a modified PSDA (M-PSDA) to address TSP with "asymmetric" demand and supply.We show that both PSDA and M-PSDA realize incentive compatibility and asymptotic efficiency. Also, the auctioneer is likely to gain higher profits from PSDA with a relatively short auction length. Under asymmetric demand and supply, this optimal auction length increases with the degree of supply-demand imbalance. However, it is optimal to run the auction (either PSDA or M-PSDA) with a relatively large auction length, when maximizing either the social welfare or the utility of shippers and carriers (agents). Finally, when the degree of supply-demand imbalance is low, the auctioneer's myopic optimal expected profit per unit of time under supply-demand imbalance is larger than that under symmetric demand and supply. But the agents' expected utility per unit of time under supply-demand imbalance significantly decreases when the degree of supply-demand imbalance increases, thereby resulting in a lower market efficiency.