Allocating Cost to Shippers in Pickup and Delivery Service

This paper is going to study the shipper collaboration cost allocation problem in pickup and delivery (SCAPPD), which includes two crucial aspects, namely, the optimal redistribution of transport requests for minimization of the total cost of the alliance and equitable allocation of the shipper’s cost for keeping the stability of the alliance. We focus on the second issue and use core concept from cooperative game theory to develop an allocation methods, called Location Cost Allocation Model (LCAM), which take geographical location factor into account. As the goal of this study is to design an allocation tool that will be accepted in practice, we use the criteria of stability, consistency, and robustness to evaluate the LCAM, Shapley, Nucleolus, and the equal profit method (EPM). All four allocation methods are applied to both a case study and randomly generated instances. Our computational results show that the stability of the LCAM is as good as the nucleolus and EPM. In terms of consistency the LCAM performs best. LCAM also performs well in terms of robustness.