CHANCE CONSTRAINED MODELS FOR TRANSPORT PRICING AND SCHEDULING UNDER COMPETITION
Abstract
The paper is concerned with the development of a model for planning shipping prices over various routes of a transportation network. It is assumed that over each route a 'railroad' (or other transport firm) competes directly with one other shipping firm (e.g., another railroad, a trucker) for the volume of business which is to be shipped over the route. We allow the possibility that the railroad's competition will come from different firms over different routes. The model we consider is a multi-route problem which involves both institutional and physical operating constraints. Each firm's demand depends linearly upon its own and its opponent's price. Since each competing firm sets its price policy independently and before the variable demand is known, some of these constraints cannot be guaranteed to hold with certainty. Thus they are best expressed as chance constraints. The objective of the 'railroad' is to maximize its profit subject to the constraints of the model. The solution of the model synthesizes a pricing policy for the 'railroad'. We also indicate how variations of the model can be employed in a sensitivity analysis of the suggested policy and discuss the relationship between our model and other notions in game theory and chance-constrained games. An example is outlined, and the implications for a welfare-economic pricing policy considered.
Document Details
- Document Type
- Technical Report
- Publication Date
- Sep 01, 1967
- Accession Number
- AD0663876
Entities
People
- Abraham Charnes
- Michael J. Kirby
- Stephen C. Littlechild
- William M. Raike
Organizations
- Northwestern University