Price-setting based combinatorial auction approach for carrier collaboration with pickup and delivery requests

A carrier collaboration problem with pickup and delivery requests is considered, in which multiple carriers form an alliance to share their pickup and delivery requests and vehicle capacities in order to reduce their transportation costs and consequently increase their profits. A multi-round pricing-setting based combinatorial auction approach is proposed to solve the problem. In each round of the auction, the auctioneer updates the price for serving each request based on Lagrangian relaxation, and each carrier, who is a bidder, determines its requests to be outsourced and the requests to be acquired from other carriers by solving a request selection problem based on the prices. Different price adjustment methods are proposed and compared. Numerical experiments on randomly generated instances demonstrate the effectiveness of the approach.