Itinerary provision and pricing in container liner shipping revenue management

• Not all container itineraries are available for maximizing profit.
• Discrete choice model based optimization approach.
• Low market share means more itineraries should be provided.
• Optimal pricing to maximize the total profit.

A shipping line may have more than one itinerary to transport containers from origin to destination. Customers choose which itinerary to use or using other shipping lines’ itinerary. We use the logit model to formulate customer’s behavior. We find that, on one side, when the freight rates of the itineraries are fixed, providing all itineraries to a customer may not maximize the shipping line’s profit. When the market share of the shipping line is low, more itineraries should be provided, and vice versa. On the other hand, when the freight rates of the itineraries could be optimized, all itineraries are provided for maximizing the expected profit. Models and algorithms are developed that determine the optimal subset of itineraries to provide with given freight rates, and the optimal freight rates when they could be adjusted.