Pushing frontiers in auction-based transport collaborations

In collaborative logistics, carriers form coalitions in order to perform parts of their operational business jointly. Combinatorial auctions can be used to exchange transportation requests without having to reveal critical information. Collaborators submit requests for exchange to a common pool. The requests in the pool are then grouped into bundles either by the auctioneer or by the carriers themselves, and offered for auction. While in the literature it is mostly assumed that both bundling and bidding is done by the carriers, our study shows that bundles built by the auctioneer under incomplete information can yield significantly higher collaboration profits, and allow for a lower number of bundles to be generated. However, even if the number of traded bundles is decreased by only offering some promising auctioneer bundles, the carriers have to present their bids for all the offered bundles. Typically, a bid is based on the carrier’s marginal profit. Hence, for each bid, an NP-hard routing problem has to be solved. To decrease this enormous computational effort, we develop different approximate bidding strategies. We show that for the single vehicle case, very simple bidding strategies are sufficient: they allow to reduce the computational time of the auction process by an order of magnitude, with no significant loss in collaboration profit. For multiple vehicles, however, our research shows that more sophisticated bidding strategies are recommended. Finally, we introduce a new profit sharing method, which is computationally tractable, guarantees individual rationality and does not require that critical information is revealed.