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

Su Xiu Xu, George Q. Huang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

63 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)136-160
Number of pages25
JournalTransportation Research Part B: Methodological
Volume56
DOIs
Publication statusPublished - Oct 2013
Externally publishedYes

Keywords

  • Double auctions
  • Mechanism design
  • Revenue management
  • Strategic timing
  • Supply-demand imbalance
  • Transportation service procurement

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Transportation

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