Walrasian Pricing for Combinatorial Markets with Compact-Bidding Languages: An Application to Truckload Transportation

Combinatorial auctions offer several economic advantages but also face multiple technical challenges, including bid generation, the need to solve a combinatorial allocation problem, and determining reasonable prices. These challenges are even more pronounced in a combinatorial exchange, where bidders can simultaneously buy and sell combinations of goods. Motivated by truckload transportation markets, we explore new mechanisms for finding linear and anonymous Walrasian equilibrium prices in combinatorial auctions and exchanges where bidders can use a compact-bidding language to express their potentially complex preferences. With the goal of improving economic efficiency and reducing the environmental impact of the trucking industry, we identify significant potential gains by developing a method for integrated allocation and price determination based on an industry-specific bidding language. We also demonstrate our proposed mechanism’s adaptability and flexibility by considering a number of practical constraints.

History: Martin Bichler, Senior Editor; Pallab Sanyal, Associate Editor.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2023.0676.