Dynamic threshold policy for delaying and breaking commitments in transportation auctions

In this paper we consider a transportation procurement auction consisting of shippers and carriers. Shippers offer time sensitive pickup and delivery jobs and carriers bid on these jobs. We focus on revenue maximizing strategies for the shippers in sequential auctions. For this purpose we propose two strategies, namely delaying and breaking commitments. The idea of delaying commitments is that a shipper will not agree with the best bid whenever it is above a certain reserve price. The idea of breaking commitments is that the shipper allows the carriers to break commitments against certain penalties. We evaluate the benefits of both strategies with simulation. In addition, we provide insight into the distribution of the lowest bid which is estimated by the shippers.