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Service location grouping and pricing in transportation: Application in air cargo

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  • Azadian, Farshid
  • Murat, Alper

Abstract

It is a common practice for transportation firms to group together a set of locations that they serve and price their services based on the group that the origin and destination of a service belong to rather than point-to-point. Proper grouping of service locations and correct pricing under this policy is essential to the financial success of firms. In this research, we develop a novel model for transportation firms to simultaneously group service locations and determine group-to-group pricing by considering the price elasticity of customers’ demand. We formulate the problem as a mixed-integer nonlinear programming and propose two exact solution algorithms based on decomposition principles. The performances of our algorithms are evaluated using computational experiments and results show that proposed methods are effective.

Suggested Citation

  • Azadian, Farshid & Murat, Alper, 2018. "Service location grouping and pricing in transportation: Application in air cargo," European Journal of Operational Research, Elsevier, vol. 267(3), pages 933-943.
    • Handle: RePEc:eee:ejores:v:267:y:2018:i:3:p:933-943
    DOI: 10.1016/j.ejor.2017.12.031
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    Cited by:

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    2. Mohammad Tamannaei & Hamid Zarei & Sajede Aminzadegan, 2021. "A Game-Theoretic Approach to the Freight Transportation Pricing Problem in the Presence of Intermodal Service Providers in a Competitive Market," Networks and Spatial Economics, Springer, vol. 21(1), pages 123-173, March.
    3. Mostafa Pazoki & Hamed Samarghandi & Mehdi Behroozi, 2023. "Increasing Supply Chain Resiliency Through Equilibrium Pricing and Stipulating Transportation Quota Regulation," Papers 2308.00681, arXiv.org, revised Oct 2023.
    4. Choi, Tsan-Ming & Wen, Xin & Sun, Xuting & Chung, Sai-Ho, 2019. "The mean-variance approach for global supply chain risk analysis with air logistics in the blockchain technology era," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 127(C), pages 178-191.
    5. Arim Park & Min Kyung Lee & Hyosoo (Kevin) Park & Ji-Hung (Ryan) Choi & Ju Myung Song, 2023. "The impact of security oversight on air cargo price and demand," Journal of Transportation Security, Springer, vol. 16(1), pages 1-22, December.

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