A choice-driven service network design and pricing including heterogeneous behaviors

Abstract

The design and pricing of services are two of the most important decisions faced by any intermodal transport operator. The key success factor lies in the ability to meet the needs of the shippers. Therefore, making full use of the available information about the demand helps to come up with good design and pricing decisions. With this in mind, we propose a Choice-Driven approach, incorporating advanced choice models directly into a Service Network Design and Pricing problem. We evaluate this approach considering both deterministic and stochastic choice models. To reduce the computational time for the stochastic instances, we propose a predetermination heuristic. The proposed models are compared to a benchmark, where shippers are solely cost-minimizers. Results show that the operator’s profits can be significantly improved, even with deterministic models. The stochastic versions further increase the realized profits: in particular, considering shippers’ heterogeneity allows a better estimation of the demand.