When cargo carriers form an alliance, sharing network capacity in order to improve profitability, a key issue is how to provide incentive for carriers to make decisions that are optimal for the alliance as a whole. We propose a mechanism that allocates both alliance resources and profits by appropriately setting prices for the resources. Clearly the behavior of an individual carrier within the alliance, and the impact of resource prices on this behavior, is important to understand. We analyze the performance of our mechanism using two different modeling approaches, and find that the behavioral model used can significantly impact alliance recommendations. More specifically, the choice of model impacts the feasibility of routing decisions made by individual carriers, as well as the properties of profit allocations that may be defined by the mechanism. Our proposed behavioral model, which makes use of more realistic control parameters than the alternative model studied, is promising with regard to both considerations. Finally, experimental results for alliances comprised of two and three carriers are analyzed; it is determined that the benefit associated with collaborating increases with network size and fleet capacity, and depending on the characteristics of demand, fleet capacity is a more important factor.

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Collaboration among shippers and carriers in the transportation industry facilitates more efficient and cost‐effective business solutions that cannot be accomplished by companies operating alone, due to the economies of scope and scale. This article surveys the problem of designing and managing collaborative initiatives to promote both the overall efficiency and the stability of a transportation alliance. We discuss three management mechanisms, each requiring different levels of central coordination and information sharing among the participating entities, and yielding different levels of guaranteed social efficiency and coalition stability. We show that by taking into account the economies of scope and scale that arise in collaboration, a fair and efficient mechanism with limited central intervention can be designed based on analytical tools, such as those in network optimization theory, cooperative game theory, and algorithmic mechanism design. We provide an overview of the existing literature on the topic and discuss the business implications of the results, as well as point out some future research directions.

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