Combinatorial Transportation Service Procurement for Online Freight Platforms Considering Shipper Collaboration

This paper studies the problem of designing combinatorial double auctions for online freight platforms, in which the platform can take advantage of the Internet to gather the demands from small shippers, form shipper collaboration, and then chooses the right carriers to meet these demands. The problem faced by the online platform is to efficiently allocate transactions and determine the appropriate transaction prices for both shippers and carriers under incomplete information. To address the problem, we propose the Padding-based Combinatorial Double Auction mechanism where the shippers bid for the transportation services for a route while the carriers bid for the transportation service combinations. We show that the mechanism is incentive-compatible, individually rational, budget-balanced, and asymptotically efficient. Furthermore, we find by the numerical studies that shipper collaboration can be effective in increasing social welfare, improving shippers’ and carriers’ utility, and increasing trading volumes at larger market sizes.