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A Bid Analysis Model with Business Constraints for Transportation Procurement Auctions


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  • Song, Jiongjiong
  • Regan, Amelia C.
  • Nandiraju, Srinivas
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    Business to business (B2B) auctions have become a dominant mechanism used by large shippers to procure contracts for transportation services from logistics companies. The bid analysis problem is of critical importance to shippers and determines which contracts are assigned to specific carriers and at what price. In practice this problem is further complicated by the consideration of shipper business rules, such as restrictions on carrier numbers, limits on the number of individual packages awarded and preferences for incumbent carriers. This paper examines the case in which bidding packages are mutually exclusive. This is referred to as a non-combinatorial auction. In practice, this type of auction is preferred to a full combinatorial auction because it allows the auctioneer (the shipper) to maintain control of the packages and creates much less cognitive strain for bidders (trucking companies). A mathematical programming model for the bid analysis problem is presented and heuristic construction algorithms and Lagrangian relaxation based algorithms are developed to solve the problem. Numerical results show that our Lagrangian relaxation based heuristics perform better than other heuristics and that the solutions are very close to optimal.

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    Bibliographic Info

    Paper provided by University of California Transportation Center in its series University of California Transportation Center, Working Papers with number qt24817929.

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    Date of creation: 01 Jan 2008
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    Handle: RePEc:cdl:uctcwp:qt24817929

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    Keywords: Social and Behavioral Sciences;


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    1. Marshall L. Fisher, 1981. "The Lagrangian Relaxation Method for Solving Integer Programming Problems," Management Science, INFORMS, INFORMS, vol. 27(1), pages 1-18, January.
    2. Song, Jiongjiong & Regan, A C, 2003. "Approximation Algorithms for the Bid Construction Problem in Combinatorial Auctions for the Procurement of Freight Transportation Contracts," University of California Transportation Center, Working Papers, University of California Transportation Center qt3j7034z2, University of California Transportation Center.
    3. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
    4. Ledyard, John O. & Olson, Mark & Porter, David & Swanson, Joseph A. & Torma, David P., 2000. "The First Use of a Combined Value Auction for Transportation Services," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 1093, California Institute of Technology, Division of the Humanities and Social Sciences.
    5. Babaioff, Moshe & Feldman, Michal & Nisan, Noam & Winter, Eyal, 2012. "Combinatorial agency," Journal of Economic Theory, Elsevier, Elsevier, vol. 147(3), pages 999-1034.
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