2466. Dynamic-Priced Contracts for Uncertain Episodic Service Demand
Invited abstract in session TD-55: Game Theory, Contracts, and Economic Models for Humanitarian Aid, stream Humanitarian Operations.
Tuesday, 14:30-16:00Room: Liberty 1.09
Authors (first author is the speaker)
| 1. | Shraddha Rana
|
| Technology and Operations Management, INSEAD | |
| 2. | Luk Van Wassenhove
|
| Technology and Operations Management Area, INSEAD |
Abstract
Following natural disasters and man-made disruptions, the uncertain, episodic, and time-sensitive demand for relief services makes it difficult for humanitarian actors to compete with private-sector customers in securing commercial service capacity, leading to high costs.
We study a case of transportation service procurement using dynamic-priced contracts to improve service-level while reducing costs in order to satisfy emergency demand. In particular, we study truckload procurement for The US Federal Emergency Management Agency(FEMA) and answer the following research questions: 1) How effective and efficient is FEMA’s current truckload procurement process compared to the private-sector shippers? 2) How should FEMA design a dynamic-priced truckload procurement contract for uncertain episodic disaster demand in the future?
We thus contribute to the disaster procurement, truckload procurement, and dynamic-pricing literature by: i) studying truckload transportation service procurement for FEMA, without capacity guarantee; ii) considering uncertain episodic demand in response to disasters; iii) modeling a dynamic-priced truckload contract; iv) examining the case where the buyer, i.e., FEMA offers the price as opposed to the seller, i.e., carriers and brokers.
Additionally, we explore how our insights can be used for dynamic pricing for other types of service procurement in a humanitarian setting, given the prevalence of uncertainty in demand.
Keywords
- Capacity Planning
- Humanitarian Applications
- Transportation
Status: accepted
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