Designing Fair Allocations for Carrier Alliances
In this work we examine and improve upon a mechanism designed to manage interactions among carriers in an air cargo alliance. Given that the mechanism can determine resource prices that encourage self-optimizing carriers to behave in a manner that is optimal for the alliance, we focus on directing the mechanism toward resource prices that lead to the fair allocation of revenue among alliance members. We explore several possible definitions for fairness, varying from a simple equitable division of benefit to more complicated rules that are based on the economic value a carrier brings to the alliance. The performance of the measures is assessed using a comprehensive set of computational experiments in which the measures are implemented for a variety of simulated three-carrier alliances. We find that striving for equitable division of benefit among members leads to more alliance revenue overall, while fairness measures based on the value of a carrier lead to divisions of benefit that are more fair. We also consider the issue of service level in the context of fairness, and discover that implementing a minimum service level requirement causes little disruption in the ability of the mechanism to achieve a fair allocation of revenue.
Management Sciences and Quantitative Methods
Houghtalen, Lori; Ergun, Ozlem; and Sokol, Joel, "Designing Fair Allocations for Carrier Alliances" (2009). Babson Faculty Research Fund Working Papers. 52.