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Integrated pricing mechanism of China Railway Express whole-process logistics based on the Stackelberg game

Author

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  • Feng, Fenling
  • Zhang, Jiaqi
  • Liu, Chengguang

Abstract

China-Railway Express(CRE), an important product to promote the “Belt and Road”, has a far-reaching significance for the economic and trade cooperation of countries along the route. However, in the early stage, it relies on subsidies to attract supplies, resulting in higher freight rates in some sections. Also, there are many transportation participants and complex transaction entities, resulting in an improved trade cost. These issues have affected the strategic CRE pricing decisions. Integrated decision-making is important to reduce transaction costs, and improve decision-making efficiency. This thesis adopts game theory to research the whole-process integrated pricing mechanism of CRE with multi-agent interaction. Considering transaction costs and pricing dominance, a distributed, horizontal, and vertical integration Stackelberg pricing game model for CRE is established and it compares the Nash equilibrium solutions of 9 pricing models. By discussing the form of the equilibrium solution, it is concluded that the larger the number of participants in the alliance and the longer the coverage mileage, the higher profit the alliance will be obtained. At the same time, numerical experiments and sensitivity analysis of key parameters are carried out by taking the China Railway Express (CY) as an example. Results show that the gross profit of CRE is the lowest under the decentralized decision-making mode, and it is the highest under the vertical integration alliance decision-making mode. If the price cap is abolished, carriers with shorter segment mileage will raise prices, leading to higher costs for CRE, while forcing carriers with longer segment mileage to cut down prices, so overall profits will suffer. This research promotes establishing a more reasonable pricing mechanism for CRE and achieving global Pareto optimality. It helps CRE get rid of subsidy dependence and achieve sustainable development.

Suggested Citation

  • Feng, Fenling & Zhang, Jiaqi & Liu, Chengguang, 2023. "Integrated pricing mechanism of China Railway Express whole-process logistics based on the Stackelberg game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 609(C).
    • Handle: RePEc:eee:phsmap:v:609:y:2023:i:c:s0378437122009311
    DOI: 10.1016/j.physa.2022.128373
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