A Choice-Driven Service Network Design and Pricing Including Heterogeneous Behaviors

Abstract: The design and pricing of services are two of the most important decisions faced by any intermodal transport operator. The key success factor lies in the ability of meeting the needs of the shippers. Therefore, making full use of the available information about the demand helps to come up with good design and pricing decisions. With this in mind, we propose a Choice-Driven approach, incorporating advanced choice models directly into a Service Network Design and Pricing problem. We evaluate this approach considering three different mode choice models: one deterministic with 4 attributes (cost, time, frequency and accessibility); and two stochastic also accounting for unobserved attributes and shippers heterogeneity respectively. To reduce the computational time for the stochastic instances, we propose a predetermination heuristic. These models are compared to a benchmark, where shippers are solely cost-minimizers. Results show that the operator profits can be significantly improved, even with the deterministic version. The two stochastic versions further increase the realized profits, but considering heterogeneity allows a better estimation of the demand.