Allocation Mechanisms for Carrier Alliances

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SCL Seminar Series: Designing Allocation Mechanisms for Carrier Alliances GUEST LECTURER Lori Hougtalen ABSTRACT Increasingly, cargo carriers are entering into collaboration in order to improve profitability. A key issue to be resolved when carriers work together in such a manner is how to distribute profit among participating members. We seek to establish a mechanism for allocating profits among cargo carriers who choose to collaborate by sharing capacity on all or a portion of their network. The mechanism should achieve a collaborative system in which (1) system profit is maximized, (2) in the absence of a centralized decision-maker, individual carriers are motivated to make decisions that achieve maximum system profit, and (3) allocations dictated by the mechanism are implementable. Critical components in the design of a mechanism to allocate system profits are the underlying mathematical models. How do we mathematically represent the interests of the system and of individual carriers within the system? We analyze two different modeling approaches and show how differences in modeling lead to significant differences in the properties of the resulting allocations. We find that one model is more flexible in terms of the range of allocations obtained under the model, and we explore how this flexibility may be used to strive for different measures of fairness. We also discuss complications that arise from this flexibility, namely the existence of a secondary market for capacity, which benefits some carriers in the collaboration, at the expense of others. Pizza and refreshments sponsored by The Supply Chain & Logistics Institute.


  • Workflow Status: Published
  • Created By: Ruth Gregory
  • Created: 01/11/2010
  • Modified By: Fletcher Moore
  • Modified: 10/07/2016

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