Posted Price Versus Auction Mechanisms in Freight Transportation Marketplaces

We consider a freight platform that serves as an intermediary between shippers and carriers in a truckload transportation network. The platform's objective is to design a mechanism that determines prices for shippers and payments to carriers, as well as how carriers are matched to loads to be transported, to maximize its long-run average profit. We analyze three types of carrier-side mechanisms commonly used by freight platforms: posted price, auction, and a hybrid mechanism where carriers can either book loads at posted prices or submit their bids. The proposed mechanisms are constructed using a fluid approximation model to incorporate carrier interactions in the freight network. We show that the auction mechanism has higher expected profits than the hybrid mechanism, which in turn has higher profits than the posted price mechanism. Thus, the hybrid mechanism achieves a trade-off between platform profit and carrier waiting time. We prove tight bounds between these mechanisms for varying market sizes. The findings are validated through a numerical simulation using industry data from the U.S. freight market.