Marginal cost pricing of truckload services: A comparison of two approaches

A useful input to the pricing of truckload trucking services is the marginal benefit to the entire system of an additional load going from one region to the next. Two approaches are reviewed for estimating the marginal system benefit. The first is based on a well-known deterministic network formulation in which certain easily obtainable shadow prices provide an estimate of the marginal benefit. The second is based on a nonlinear stochastic formulation which incorporates uncertainty in demand forecasts. Each procedure is reviewed in detail and evaluated in terms of the accuracy with which the actual change in total system profit (found by increasing the demand on a link and completely reoptimizing) matches the estimated benefit.