Study on Pricing Optimization Model of For-Hire Truck in the Highway Freight Market

Since there is more redundant supply capacity in the highway freight market, the competition between the carriers for the price becomes fierce in the buyer market. To solve this problem, this paper attempted a new pricing method introducing the associated influence of two substitutable service prices on given freight demand. As an economic system, the dual-price demand function model of for-hire truck freight market was established with the expression technique of simultaneous equations in econometrics. Considering two kinds of market structures——perfect competitive market and monopolistic competition market, the identification and calibration of the established model were discussed. The local truck and the foreign truck were regarded as two oligarchs in the for-hire truck freight market. By calibrating the parameters of the dual-price demand function in the Bertrand oligarch model, the optimal equilibrium prices were obtained by maximizing the profit for both carrier types. This research shows that it is reasonable and feasible for the for-hire truck to price at two levels, and that the optimal equilibrium prices turn to be different in the distinct market structures of highway freight market. The study provides an exploratory analytical view and the necessary theoretical support to revise the freight price, to regulate the market order and to avoid the vicious competition.