Incorporating the pricing decisions into the dynamic fleet management problem

Abstract

This paper presents a model to coordinate the pricing and fleet management decisions of a freight carrier. We consider a setting where the loads faced by the carrier over a certain time horizon are deterministic functions of the prices. We want to find what prices the carrier should charge so that its pricing and fleet management decisions jointly maximize the profits. Our solution approach is an iterative one. At each iteration, we solve the fleet management problem with fixed prices, and then, adjust these prices by using the primal-dual solution to the fleet management problem so as to obtain ‘better’ prices. Computational experiments show that our approach yields high-quality solutions and can efficiently be applied on large problems.

Keywords:

• transport
• road transport
• logistics
• pricing

Acknowledgements

This work was supported in part by National Science Foundation Grant DMI-0422133.