Abstract
An important element of the U.S. motor carrier industry is the transportation spot market. The transportation spot market consists of shipments handled on a one-time, load-by-load basis and exists to facilitate urgent or unfulfilled demand. This market is characterized by price volatility and uncertainty in the availability of capacity. These aspects of the spot market make it challenging for shippers who rely on it. Because of the severe shortage of spot market capacity and the relatively high and volatile prices, shippers must actively seek carrier capacity (i.e., conduct traditional transportation auctions). Often, shippers employ the help of third parties. This research yields insight into the spot market by presenting some results of a hypothetical field experiment on spot market transactions for truckload shipments. The assumption was that a shipper's efforts to secure truckload capacity could be improved with better information on how carriers valued potential transactions differently. The research demonstrated that given choice data, accurate estimation of the minimum amount of compensation various carriers require to provide capacity (i.e., the reservation price) was possible. Furthermore, the research explored the practice of sourcing multiple spot market loads simultaneously, or bundling. The insights from this study can lead to improved decision making and improved business outcomes for shippers and carriers alike.
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