Transportation service procurement using combinatorial auctions

Abstract

Auction is a mechanism of selling distinct assets that can be both physical objects and virtual objects. Examples of virtual objects are the rights to use assets like airport time slots and FCC spectrum, or to service truckload delivery routes in a transportation network. Under some situations bidding on combinations of objects can render lower total price compare with bidding the objects one at a time, and the auction that allows bidders to bid on combinations of different assets are called combinatorial auctions. With shipper being the auctioneer and carriers being the bidders, combinatorial auction has become increasingly important in the transportation service procurement domain, due to its mechanism to align shipper s procurement interest with carrier transportation service cost structure, which in turn lowers shippers total procurement cost. The thesis provides a comprehensive review of the use of conditional bidding within a transportation combinatorial auction framework. The thesis first describes the general forms of the transportation services available, and discusses the economics of motor carriers that provide LTL and TL services. It then illustrates the basic optimization technique of conditional bidding for TL service procurement and discusses the information technologies that enable the optimization-based procurement and the actual application of the method in the real world.