Truthful multi-unit transportation procurement auctions for logistics e-marketplaces

George Q. Huang, Su Xiu Xu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

81 Citations (Scopus)

Abstract

This paper is among the first contributions that incorporate bilateral bidding into auction mechanism design for multi-unit transportation procurement in logistics e-marketplaces. Proposed mechanisms ensure incentive compatibility, individual rationality, budget balance and asymptotical efficiency. We first consider one-sided VCG (Vickrey-Clarke-Groves) combinatorial auctions for a complex transportation marketplace with multiple lanes, realizing the maximal social welfare. We then design three alternative multi-unit trade reduction (MTR) mechanisms for the bilateral exchange transportation marketplace where all the lanes are partitioned into distinct markets. Compared to the base MTR mechanism, more buyers/shippers win the " tickets" for competing in the final trade in the MTR-BA (buyer augment) mechanism; likewise, more sellers/carriers win these tickets in the MTR-SA (seller augment) mechanism. Under the buyer and seller augment mechanisms, both shippers' and carriers' expected utilities are higher than those in the base MTR mechanism. Numerical study further shows that MTR-BA and MTR-SA mechanisms lead to higher expected utilities for shippers and carriers respectively than social welfare maximization. However, the base MTR mechanism provides a higher payoff to the market broker than MTR-BA and MTR-SA mechanisms. Finally, we propose a randomized mechanism that integrates one-sided VCG mechanisms and MTR mechanisms. As a result, this randomized mechanism is practical in both the one-sided and bilateral exchange transportation marketplaces, even with the less-than-truckload constraint.

Original languageEnglish
Pages (from-to)127-148
Number of pages22
JournalTransportation Research Part B: Methodological
Volume47
DOIs
Publication statusPublished - Jan 2013
Externally publishedYes

Keywords

  • Auctions
  • Incentive compatibility
  • Mechanism design
  • Transportation service procurement

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Transportation

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