A dynamic pricing strategy for a 3PL provider with heterogeneous customers

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dc.contributor.authorZhang, Jian
dc.contributor.authorNault, Barrie R.
dc.contributor.authorTu, Paul Yiliu L.
dc.date.accessioned2020-01-21T18:56:36Z
dc.date.available2020-01-21T18:56:36Z
dc.date.issued2015-06-08
dc.description.abstractWe study the pricing problem for a third-party-logistics (3PL) provider that provides ware-housing and transportation services. When customers arrive at the 3PL provider, they specify the delivery dates for their freight, and before the specified delivery dates, their freight is stocked in the 3PL provider’s warehouse. We propose a dynamic pricing strategy (DPS) and develop a stochastic-nonlinear-programming (SNLP) model which computes the optimal freight rates for different delivery dates incorporating the 3PL provider’s current holding cost and available transportation capacity for each route. As customers are heterogeneous in their valuations and price sensitivities for delivery dates, and the distributions of the customers’ delivery date preferences are unknown to the 3PL provider, we modify the standard multinomial logit (MNL) function to predict customer choices. Through a simulation experiment, we show that the proposed MNL function can be a good replacement for the mixed MNL function when the mixed MNL function is not applicable. Through simulation we also compare the proposed DPS with a static pricing strategy. We show that with our DPS both the 3PL provider and its customers are better off, and the 3PL provider has different investment incentives for increasing transportation capacity. Our results can be also applied in similar settings that feature holding costs, limited production capacity and delivery-date-sensitive customers. Keywords: dynamic pricing, multinomial logit, third-party logistics, stochastic programmingen_US
dc.identifier.citationZhang, J., Nault, B. R., & Tu, P. Y. L. (2015). A dynamic pricing strategy for a 3PL provider with heterogeneous customers. 1-34.en_US
dc.identifier.doihttp://dx.doi.org/10.11575/PRISM/37486
dc.identifier.urihttp://hdl.handle.net/1880/111534
dc.language.isoengen_US
dc.publisher.facultyHaskayne School of Businessen_US
dc.publisher.institutionUniversity of Calgaryen_US
dc.rightsUnless otherwise indicated, this material is protected by copyright and has been made available with authorization from the copyright owner. You may use this material in any way that is permitted by the Copyright Act or through licensing that has been assigned to the document. For uses that are not allowable under copyright legislation or licensing, you are required to seek permission.en_US
dc.subjectdynamic pricingen_US
dc.subjectmultinomial logiten_US
dc.subjectthird-party logisticsen_US
dc.subjectstochastic programmingen_US
dc.titleA dynamic pricing strategy for a 3PL provider with heterogeneous customersen_US
dc.typejournal articleen_US
dc.typesubmittedVersionen_US
dc.typejournal articleen_US
dc.typesubmittedVersionen_US
ucalgary.item.requestcopytrueen_US
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