Auction Mechanisms for Order Allocation and Payment Schemes in a Crowd-shipping System

Abstract

<p>This work investigates the order allocation and payment schemes for an urban crowd-shipping (CS) platform, where the latent capacity of traveling ‘crowd’ in the transportation system is utilized to move parcels. There are enormous traveling trips every day, which provides the opportunity to develop crowd-shipping to address the soaring parcel delivery demand in urban cities. In a CS system, a CS operator sits between orders and travelers, acting as an integrator who seeks the services provided by either the crowd carrier or the outsourced dedicated carrier. To ensure the sustainability of such platforms, the key challenge lies in matching orders to crowd carriers so that the payments are differentiated, CS platforms gain non-negative profits and system efficiency is achieved. However, individual crowd carriers’ preferences and valuations are not readily available, which motivates us to develop an auction-based order allocation and payment mechanism in this study. In our proposed CS system, crowd carriers report their trip information (e.g., origin and destination) to the CS platform and are recommended for some orders for each route. Then travelers select their intended orders and submit route-based bids based on the detour costs. The mechanism takes crowd carriers’ strategic behavior into account and applies Vickrey-Clarkes-Groves (VCG) payment scheme to ensure incentive compatibility, individual rationality, and system efficiency. For the sake of computational efficiency, we design another greedy auction mechanism inspired by the primal dual approach. Some numerical experiments are conducted to test the performance of the proposed mechanisms.<br></p>