The price of anarchy in truckload transportation spot markets

Abstract

A concept of relevance to spot markets for truck-based freight transportation services is the price of anarchy ( PoA ) , which defines the performance inferiority of decentralized market mechanisms for consummating transactions (vis-à-vis centralized mechanisms). To examine this concept in the context of transportation spot markets, this study uses a combination of behavioral experiments and mathematical optimization. The paper's contributions to the research literature for that context involve (1) addressing the case of freight transportation service providers having service requests information spanning multiple periods; (2) analyzing multiple performance measures; (2) accounting for the performance effects of human behavior; and (3) introducing new behavioral experiments as well as novel and effective analytical procedures to tackle truck-to-load assignment problems. Among the paper's most salient findings is that when performance is measured as the market participants' financial outcome, human behavior in buyer-seller interactions could result in a doubling of the PoA . • Models the Price of Anarchy (PoA) for decentralized spot market transactions. • Considers three PoA metrics: private profits, customer service, eco-efficiency. • Models the impact of human bounded rationality on the PoA. • Develops and solves mathematical models of multi-day truck-to-load assignments. • Introduces an on-line tool for human behavior experiments to study spot markets.