A Pricing Method for Small-size Cargo Express Service in Long Distance Highway Transportation

Abstract

After a survey of 10 long-distance highway passenger transportation stations in Beijing, we found that 50% of the stations do not provide express services for small-size cargo. Passenger stations that provide such services have a low profit. The main reason is that there is no effective pricing method for small-size cargo express services. To address this issue, we first looked at the operating costs of all the parties involved in small-size cargo express services. According to the customers' freight transport demand function, we propose a model for determining the price of small-size cargo express services with an objective function of maximizing the starting station's revenue. Based on the model, necessary conditions are specified in order for passenger stations and companies to operate such businesses. Furthermore, a method of fitting the transportation demand function is provided based on actual operations and services. Finally, a numerical example is given to illustrate the application of the proposed pricing method for small-size cargo express services.