Intermodal pricing using network flow techniques

Intermodal pricing using network flow techniques

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Article ID: iaor1996220
Country: United States
Volume: 29B
Issue: 3
Start Page Number: 171
End Page Number: 180
Publication Date: Jun 1995
Journal: Transportation Research. Part B: Methodological
Authors: , ,
Keywords: networks: flow
Abstract:

Traditional cost calculations do not accurately estimate the opportunity costs of using conveyances in intermodal operations, thus, results in many short-term pricing problems. The objective of this research is to develop a framework for estimating the opportunity costs of using conveyances in trailer-on-flatcar operations to assist carriers in improving their pricing strategies under highly competitive market conditions. The framework is based on a network model that simulates current operations in order to find the reduced costs and the opportunity costs of serving the loads. The network model is formulated as a linear network flow problem with side constraints. To find the reduced costs, a technique using Lagrangean Relaxation, a minimum cost algorithm, and a shortest path algorithm were developed in the research. The authors illustrate this model with a case study of a major north American railroad. The results show that opportunity costs do affect the accuracy of calculated system contributions for services. Moreover, the opportunity costs and system incremental costs are unstable over time. To handle the instability the authors make use of a new risk-pricing approach.

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