Truthful, Budget-Balanced Bundle Double Auctions for Carrier Collaboration

Abstract

This paper aims to propose effective auction mechanisms for the carrier collaboration problem with bilateral exchange, which is generally the problem of how to realize the potential of carrier collaboration over a bilateral exchange transportation network (e.g., a B2B e-commerce logistics environment). Carriers offer the lanes with the highest marginal costs for subcontracting, while they are allowed to bid on bundles of the lanes. We construct a bundle double auction (BDA) for the one-unit demand case in which the lane offered by each buyer (transportation service purchaser) is only required to be covered with one truckload once. The BDA mechanism realizes incentive compatibility, individual rationality, budget balance, and asymptotical efficiency. We then propose two mechanisms, called BDA-1 and BDA-2, for the multiunit demand case in which each buyer asks for one or multiple truckloads of transportation service. Both mechanisms are effective but differ in incentive compatibility and realized social welfare. The computational study shows that all proposed mechanisms are practically implementable and lead to considerable cost savings for the carrier collaboration network, and most of the benefits generated via collaboration are assigned among carriers. We also numerically analyze the impacts of three operational factors: network structure, the degree of self-served lanes, and the number of lanes in the network.