Pricing for freight carriers in a competitive environment: A game theory approach

Abstract

Article history: Received 2 January 2011 Received in revised form April, 18, 2011 Accepted 20 April 2011 Available online 22 April 2011 In recent years, development of freight transport industry has led to fierce competition among transportation companies and therefore carrier-pricing issue has received more attention by researchers. This paper studies pricing and fleet management decisions for full-truckload freight carriers, which compete on a road network. We propose a game theory approach under two scenarios. In the first, we model the non-cooperative game wherein the carriers announce their prices simultaneously in competition; in the second, we allow the carriers to share their information and announce their prices while participating in cooperation. We show that carriers can reach the highest profit level in the latter scenario; subsequently, a bargaining game is discussed as a scheme to share the extra joint profit. © 2011 Growing Science Ltd. All rights reserved