A freight transport price optimization model with multi bounded-rational customers

Xueyan Li () and Jing Li ()
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Xueyan Li: Beijing Union University
Jing Li: Beijing Jiaotong University

Transportation, 2021, vol. 48, issue 1, No 18, 477-504

Abstract: Abstract To analyze the effect of customer enterprises’ behavior on freight transport markets with various products, a bi-level programming model for freight pricing is developed. The transport companies make decisions in the upper level, a large number of customer enterprises make decisions at the lower level. Cumulative prospect theory is adopted to depict customers’ bounded rationality. The complex network model is introduced to construct the interactions among customer enterprises where the changes in their risk attitudes are depicted by dynamic evolution of their heterogeneous reference points. The existence of the generalized Nash equilibrium is proved and verified. A comparison of the optimal solutions of the new model and the traditional logit based choice model is conducted. The results show that (1) the new model fully embodies the characteristics of cumulative prospect theory and can also improve customers’ utility; (2) the equilibrium freight price and the total profits of transport companies increase with increases in the customers’ interaction intensity.

Keywords: Freight price; Multi-agent models; Bi-level programming; Complex network; Cumulative prospect theory (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11116-019-10064-0

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