1. Optimizing pricing and packing of variable-sized cargo
- Author
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Antonio Martinez-Sykora, Christine S. M. Currie, M.C. So, Christopher Bayliss, and Julia A. Bennell
- Subjects
050210 logistics & transportation ,021103 operations research ,Linear programming ,Operations research ,Computer science ,Applied Mathematics ,Strategy and Management ,05 social sciences ,Commodity ,0211 other engineering and technologies ,02 engineering and technology ,Management Science and Operations Research ,Space (commercial competition) ,USable ,Product type ,Management Information Systems ,Variable (computer science) ,Modeling and Simulation ,0502 economics and business ,Dynamic pricing ,Revenue ,General Economics, Econometrics and Finance - Abstract
Organizations have successfully used dynamic pricing to optimize revenues for many years, where research and practice have mainly focused on applications with independent, discrete commodities; for example, an airline ticket. In this research we consider applications where the commodity is continuous and the value of the commodity available to sell depends on the combination of previously accepted demand. We focus on vehicle ferries, where the accepted vehicle bookings are packed in lanes in the ferry to leave a usable space for future bookings. Certain combinations of vehicles may result in areas of unusable space, which will affect future revenue. While this application is the focus of the paper, there are numerous industries that face similar challenges including freight and the sale of advertising on television and radio. In this paper, we simultaneously solve the pricing and resource utilization problem to optimality for a discrete set of product types and stochastic demand. Our approach combines a dynamic pricing model with a mixed-integer linear program to optimize the packing. We present results for real-world examples from the ferry industry and discuss extensions to the method to improve the selection of vehicle configurations.
- Published
- 2020