Collaboration in Cargo Transportation

  • Richa Agarwal
  • Özlem Ergun
  • Lori Houghtalen
  • Okan Orsan Ozener
Part of the Springer Optimization and Its Applications book series (SOIA, volume 30)


We discuss two forms of collaboration in cargo transportation: carrier alliances in sea and air cargo, and shipper collaborations in trucking. After discussing the current industry settings that make such collaborations beneficial, we present a set of questions that need to be answered in the collaborative setting. These questions deal with issues such as (i) what is the maximum benefit the collaboration can achieve? (ii) How should these benefits be allocated? (iii) What membership rules and regulations will increase the sustainability of a given alliance? We provide a set of models for resolving these issues and analyze the properties of the solutions obtained from them.


Secondary Market Cost Allocation Side Payment Liner Shipping Revenue Management 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.



Ozlem Ergun was partially supported by NSF ITR Grant 0427446.


  1. 1.
    R. Agarwal and O. Ergun. Mechanism design for a multicommodity flow game in service network alliances. To appear in Operations Research Letters, 2008.Google Scholar
  2. 2.
    R. Agarwal and O. Ergun. Network design and allocation mechanisms for carrier alliances in liner shipping. Under revision for Operations Research, 2008.Google Scholar
  3. 3.
    R. Agarwal and O. Ergun. Ship scheduling and network design for cargo routing in liner shipping. Transportation Science, 42(2):175–196, 2008.Google Scholar
  4. 4.
    R. K. Ahuja and J. B. Orlin. Inverse optimization. Operations Research, 49(5):771–783, 2001.Google Scholar
  5. 5.
    K. S. Anand and R. Aron. Group buying on the web: A comparison of price-discovery mechanisms. Management Science, 49(11):1546–1562, 2003.Google Scholar
  6. 6.
    ATA. Trucking activity report. Technical report, American Trucking Associations, Arlington, VA, 2005. Scholar
  7. 7.
    G. E. Bamberger, D. W. Carlton, and L. R. Neumann. An empirical investigation of the competitive effects of domestic airline alliances. Journal of Law and Economics, XLVII, April 2004.Google Scholar
  8. 8.
    A. Boyd. Airline alliances. OR/MS Today, 25(5):28–31, 1998.Google Scholar
  9. 9.
    C. Caplice and Y. Sheffi. Optimization-based procurement for transportation. Journal of Business Logistics, 24(2):109–128, 2003.Google Scholar
  10. 10.
    E.-P. Chew, H.-C. Huang, E. L. Johnson, G. L. Nemhauser, J. S. Sokol, and C.-H. Leong. Short-term booking of air cargo space. European Journal of Operational Research, 174:1979–1990, 2006.MATHCrossRefGoogle Scholar
  11. 11.
    M. Christiansen, K. Fagerholt, and D. Ronen. Ship routing and scheduling: Status and perspectives. Transportation Science, 38(1):1–18, 2004.Google Scholar
  12. 12.
    R. Dembo and D. Rosen. The practice of portfolio replication: A practical overview of forward and inverse problems. Annals of Operations Research, 85(0):267–284, 1999.Google Scholar
  13. 13.
    R. Dial. Minimal revenue congestion pricing Part II: An efficient algorithm for the general case. Transportation Research B, 34:645–665, 2000.Google Scholar
  14. 14.
    R. J. Dolan. Quantity discounts: Managerial issues and research opportunities. Marketing Science, 6(1):1–22, 1987.Google Scholar
  15. 15.
    M. Dror. Cost allocation: The traveling salesman, bin packing, and the knapsack. Applied Mathematics and Computation, 35:191–207, 1990.MATHCrossRefMathSciNetGoogle Scholar
  16. 16.
    R. Engelbrecht-Wiggans and D. Granot. On market prices in linear production games. Mathematical Programming, 32(3):366–370, 1985.MATHCrossRefMathSciNetGoogle Scholar
  17. 17.
    S. Engevall, M. Gothe-Lundgren, and P. Varbrand. The heterogeneous vehicle-routing game. Transportation Science, 38(1):71–85, 2004.Google Scholar
  18. 18.
    O. Ergun, G. Kuyzu, and M. Savelsbergh. Reducing truckload transportation costs through collaboration. Transportation Science, 41(2):206–221, 2007.CrossRefGoogle Scholar
  19. 19.
    O. Ergun, G. Kuyzu, and M. Savelsbergh. The shipper collaboration problem. Computers and Operations Research, 34(6):1551–1560, 2007.Google Scholar
  20. 20.
    K. Fagerholt. Optimal fleet design in a ship routing problem. International Transactions in Operational Research, 6:453–464, 1999.CrossRefGoogle Scholar
  21. 21.
    M. Goemans and M. Skutella. Cooperative facility location games. Annual ACM-SIAM Symposium on Discrete Algorithms, 2000.Google Scholar
  22. 22.
    D. Granot, H. Hamers, and S. Tijs. On some balanced, totally balanced and submodular delivery games. Mathematical Programming, 86(2):355–366, 1999.MATHCrossRefMathSciNetGoogle Scholar
  23. 23.
    H. Gurnani. A study of quantity discount pricing models with different ordering structures: Order coordination, order consolidation, and multi-tier ordering hierarchy. International Journal of Production Economics, 72(3):203–225, 2001.Google Scholar
  24. 24.
    R. W. Hall. Configuration of an overnight package air network. Transportation Research A, 23(2):139–149, 1989.CrossRefGoogle Scholar
  25. 25.
    H. Hamers. On the concavity of delivery games. European Journal of Operational Research, 99(2):445–458, 1997.MATHCrossRefGoogle Scholar
  26. 26.
    L. Houghtalen. Designing Allocation Mechanisms for Carrier Alliances. Ph.D. thesis, Georgia Institute of Technology, 2007.Google Scholar
  27. 27.
    L. Houghtalen, O. Ergun, and J. Sokol. Designing mechanisms for the management of carrier alliances. Working paper, 2008.Google Scholar
  28. 28.
    N. Immorlica, M. Mahdian, and V. S. Mirrokni. Limitations of cross-monotonic cost sharing schemes. In Proceedings of 16th ACM Symposium on Discrete Algorithms, pages 602–611, 2005.Google Scholar
  29. 29.
    H. Ito and D. Lee. Domestic codesharing, alliances, and airfares in the U.S. airline industry. The Journal of Law and Economics, 50:355–380, 2007.Google Scholar
  30. 30.
    K. Jain and V. V. Vazirani. Applications of approximation algorithms to cooperative games. In Proceedings of 33rd ACM Symposium on Theory of Computing, pages 364–372, 2001.Google Scholar
  31. 31.
    E. Kalai and E. Zemel. Generalized network problems yielding totally balanced games. Operations Research, 30(5):998–1008, 1982.MATHCrossRefGoogle Scholar
  32. 32.
    R. Kasilingam. Air cargo revenue managment: Characteristics and complexities. European Journal of Operational Research, 96:36–44, 1996.CrossRefGoogle Scholar
  33. 33.
    M. Kubo and H. Kasugai. On the core of the network design game. Journal of Operational Research Society of Japan, 35:250–255, 1992.MATHMathSciNetGoogle Scholar
  34. 34.
    M. J. Kuby and R. G. Gray. The network design problem with stopovers and feeders: The case of Federal Express. Transportation Research A, 27:1–12, 1993.Google Scholar
  35. 35.
    K. J. M. Gothe-Lundgren and P. Varbrand. On the nucleolus of the basic vehicle routing game. Mathematical Programming, 72:83–100, 1996.Google Scholar
  36. 36.
    R. Midoro and A. Pitto. A critical evaluation of strategic alliances in liner shipping. Maritime Policy and Management, 27(1):31–40, 2000.CrossRefGoogle Scholar
  37. 37.
    E. W. Moore, J. M. Warmke, and L. R. Gorban. The indispensable role of management science in centralizing freight operations at Reynolds Metals Company. Interfaces, 21(1):107–129, 1991.CrossRefGoogle Scholar
  38. 38.
    P. Morrell and R. Pilon. KLM and Northwest: A survey of the impact of a passenger alliance on cargo service characteristics. Journal of Air Transport Management, 5:153–160, 1999.CrossRefGoogle Scholar
  39. 39.
    S. Morrish and R. Hamilton. Airline alliances–who benefits? Journal of Air Transport Management, 8:401–407, 2002.CrossRefGoogle Scholar
  40. 40.
    H. Moulin. Cooperative Microeconomics: A Game-Theoretic Introduction. Princeton University Press, Princeton, NJ, 1995.Google Scholar
  41. 41.
    S. Netessine and R. A. Shumsky. Revenue management games: Horizontal and vertical competition. Management Science, 51(5):813–831, 2005.CrossRefGoogle Scholar
  42. 42.
    N. Nisan and A. Ronen. Algorithmic mechanism design. Games and Economic Behavior, 35:166–196, 2001.MATHCrossRefMathSciNetGoogle Scholar
  43. 43.
    G. Owen. On the core of linear production games. Mathematical Programming, 9(3):358–370, 1975.MATHCrossRefMathSciNetGoogle Scholar
  44. 44.
    G. Owen. Indices of power. In Game Theory, pages 261–266. Academic Press, 2001.Google Scholar
  45. 45.
    O. O. Ozener and O. Ergun. Allocating costs in a collaborative transportation procurement network. Transportation Science, 42(2):146–165, 2008.CrossRefGoogle Scholar
  46. 46.
    O. O. Ozener and O. Ergun. Collaborative opportunities in a multicarrier transportation procurement network. Working paper, 2008.Google Scholar
  47. 47.
    J.-H. Park, A. Zhang, and Y. Zhang. Analytical models of international alliances in the airline industry. Transportation Research, 35B:865–886, 2001.Google Scholar
  48. 48.
    A. N. Perakis. Fleet operations optimization and fleet deployment. In C. T. Grammenos, editor, The Handbook of Maritime Economics and Business, pages 580–597. Lloyd’s of London, 2002.Google Scholar
  49. 49.
    K. Rana and R. G. Vickson. Routing container ships using Lagrangean relaxation and decomposition. Transportation Science, 25(3):201–214, 1991.MATHCrossRefGoogle Scholar
  50. 50.
    D. Ronen. Cargo ships routing and scheduling: Survey of models and problems. European Journal of Operational Research, 12:119–126, 1983.CrossRefGoogle Scholar
  51. 51.
    D. Ronen. Ship scheduling: The last decade. European Journal of Operational Research, 71(3):325–333, 1993.MATHCrossRefGoogle Scholar
  52. 52.
    D. K. Ryoo and H. A. Thanopoulou. Liner alliances in the globalization era: A strategic tool for Asian container carriers. Maritime Policy and Management, 26(4):349–367, 1999.CrossRefGoogle Scholar
  53. 53.
    D. Samet and E. Zemel. On the core and dual set of linear-programming games. Mathematics of Operations Research, 9(2):309–316, 1984.MATHCrossRefMathSciNetGoogle Scholar
  54. 54.
    J. Sànchez-Soriano. Pairwise solutions and the core of transportation situations. European Journal of Operational Research, 175:101–110, 2006.MATHCrossRefMathSciNetGoogle Scholar
  55. 55.
    J. Sànchez-Soriano, M. A. Lopez, and I. Garcia-Juardo. On the core of transportation games. Mathematical Social Science, 41:215–225, 2001.MATHCrossRefGoogle Scholar
  56. 56.
    L. Shapley. Cores of convex games. International Journal of Game Theory, 1:11–26, 1971.MATHCrossRefMathSciNetGoogle Scholar
  57. 57.
    L. Shapley and M. Shubik. The assignment game I: the core. International Journal of Game Theory, 1:111–130, 1972.CrossRefMathSciNetGoogle Scholar
  58. 58.
    Y. Sheffi. Combinatorial auctions in the procurement of transportation services. Interfaces, 34(4):245–252, 2004.CrossRefGoogle Scholar
  59. 59.
    X. Shi and S. Voss. Container terminal operations under the influence of shipping alliances. In K. Bichou, M. Bell, and A. Evans, editors, Risk Management in Port Operations, Logistics and Supply Chain Security. Informa, 2007.Google Scholar
  60. 60.
    B. Slack, C. Comtois, and R. McCalla. Strategic alliances in the container shipping industry: A global perspective. Maritime Policy and Management, 29(1):65–76, 2002.CrossRefGoogle Scholar
  61. 61.
    D. W. Song and P. M. Panayides. A conceptual application of cooperative game theory to liner shipping strategic alliances. Maritime Policy and Management, 29(3):285–301, 2002.CrossRefGoogle Scholar
  62. 62.
    J. J. Song and A. Regan. Combinatorial auctions for transportation service procurement - the carrier perspective. In Freight Policy, Economics, and Logistics; Truck Transportation, Transportation Research Record, pages 40–46. 2003.Google Scholar
  63. 63.
    D. J. Thomas and P. M. Griffin. Coordinated supply chain management. European Journal of Operational Research, 94(1):1–15, 1996.Google Scholar
  64. 64.
    B. Vinod. Alliance revenue management. Journal of Revenue and Pricing Management, 4(1):66–82, 2005.CrossRefGoogle Scholar
  65. 65.
    S. Voss and X. Shi. Non-cooperative games in liner shipping strategic alliances. 2006.Google Scholar
  66. 66.
    C. Wright, H. Groenevelt, and R. Shumsky. Dynamic revenue management in airline alliances. Working paper, 2006.Google Scholar
  67. 67.
    H. P. Young. Cost Allocation: Methods, Principles, Applications. North-Holland, Amsterdam, The Netherlands, 1985.Google Scholar
  68. 68.
    A. Zhang, Y. V. Hui, and L. Leung. Air cargo alliances and competition in passenger markets. Transportation Research, 40E:83–100, 2004.Google Scholar
  69. 69.
    A. Zhang and Y. Zhang. Issues on liberalization of air cargo services in international aviation. Journal of Air Transport Management, 8:275–287, 2002.CrossRefGoogle Scholar

Copyright information

© Springer-Verlag US 2009

Authors and Affiliations

  • Richa Agarwal
    • 1
  • Özlem Ergun
    • 1
  • Lori Houghtalen
    • 1
  • Okan Orsan Ozener
    • 1
  1. 1.Department of Industrial and Systems EngineeringGeorgia Institute of TechnologyAtlanta

Personalised recommendations