Dynamic pricing and freight transportation planning in oligopolistic freight networks: a game theoretic approach

Abstract

This paper studies the dynamic pricing problem for freight carriers who compete to win transportation contracts in oligopolistic freight networks. The problem is formulated as a discrete-time dynamic Nash equilibrium. The transportation service demand is defined as a competitive price-sensitive function over different network lanes. Each carrier dynamically changes his prices to maximise his benefit while considering the rivals’ strategies. They simultaneously decide on the fleet planning with regard to their own vehicle supply on different network locations, which determines the overall flow on the network. We incorporate a generalised Branch and Bound procedure into a decomposition algorithm to solve the problem. Furthermore, a relaxation procedure is presented to provide a proper bound. Finally, some numerical examples are presented to demonstrate how the algorithm works and the sensitivity of the critical parameters is discussed.