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

Abstract

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' competition on a road network. We propose a game theoretic 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.

Keywords

• Freight transportation
• Carrier pricing
• Fleet management
• Competition
• Cooperation
• Game theory