Exact and hybrid heuristic methods to solve the combinatorial bid construction problem with stochastic prices in truckload transportation services procurement auctions

Abstract In combinatorial auctions for the procurement of transportation services, each carrier has to determine the set of profitable contracts to bid on and the associated ask prices. This is known as the Bid Construction Problem (BCP). Our paper addresses a BCP with stochastic clearing prices taking into account uncertainty on other competing carriers’ offers. Contracts’ selection and pricing decisions are integrated to generate multiple combinatorial bids. Our paper is the first to propose an exact non-enumerative method to solve this NP-Hard problem. Our computational results demonstrate that optimal solutions can be obtained on instances with up to 50 contracts. We also propose a hybrid heuristic that yields most of the these optimal solutions in a fraction of the run time, and provides competitive solutions for the remaining instances. Finally, our results show the good performance of our exact method for a set of auction contexts we simulate.