Solving Truckload Procurement Auctions Over an Exponential Number of Bundles

Truckload carriers provide hundreds of $billions worth of services to shippers in the U.S. alone each year. Internet auctions provide these shippers with a fast, easy way to negotiate potential contracts with a large number of carriers. Combinatorial auctions have the added benefit of allowing multiple loads to be considered simultaneously in a single auction. This is important because it enables carriers to connect multiple loads in continuous moves or tours, decreasing the empty mileage that must be driven and therefore reducing cost. On the other hand, combinatorial auctions require bidding on an exponential number of loads in order to achieve full economies of scope and scale, which is not tractable except for very small auctions. In most real-world auctions, bidding is instead typically limited to a very small subset of the potential bids. We present a new approach to combinatorial auctions for truckload procurement that enables the complete set of all possible bids to be considered implicitly, without placing the corresponding burden of an exponential number of bids on either the bidders or the auctioneer. We present the models needed to solve this problem. We then provide extensive computational results to demonstrate the tractability of our approach. Finally, we conclude with numerical analysis to assess the quality of the solutions that are generated.