Carrier collaboration based on market design

This paper investigates a carrier collaboration problem to explore the potential of lane exchange among a number of self-interested truckload carriers in a network. The least preferred (loaded) lane of a carrier and its marginal cost are obtained aiming to find the optimal set of cycles covering a single carrier's lanes. A vehicle routing model is integrated into the price-compatible top trading cycles and chains (PC-TTCC) mechanism for this purpose. Experimental simulations show that the PC-TTCC mechanism results in a significant cost saving for the collaboration network and (ex post) budget balance. Especially in the clustered network, the PC-TTCC mechanism can achieve cost saving by 17% for the network, and make 84% of carriers strictly better off. Additionally, nearly one half of the carriers share 80% of total cost saving in the PC-TTCC mechanism. Some important practical and managerial implications of designing and operating the collaboration network are obtained based on the key findings and observations from the simulations.