A carrier’s optimal bid generation problem in combinatorial auctions for transportation procurement

Abstract

We consider the carrier’s optimal bid generation problem in combinatorial auctions for transportation procurement. Bidders (carriers) employ vehicle routing models to identify sets of lanes (origin-destination pairs) based on the actual routes that a fleet of trucks will follow in order to maximize profit. Routes are constructed by optimally trading off repositioning costs of vehicles and the rewards associated with servicing lanes. The carrier optimization represents simultaneous generation and selection of routes and can incorporate any existing commitment. We employ both column generation and Lagrangian based techniques for solving the carrier optimization model and present numerical results.