Pricing and yield
Capacity is perishable. Price it accordingly.
Cargo capacity is a two dimensional constraint, weight and volume, sold across a network of connecting resources. That makes pricing a network revenue management problem rather than a rate card lookup.
Price a quote
At 60% utilization, the revenue optimum sits 9.9% below the rate card. Quoting the card wins less than it should and forfeits about $33 of expected contribution per quote.
The problem class
Where the money leaks.
Two dimensional capacity, weight and volume.
Every acceptance consumes both. Neither one alone is a sufficient booking constraint.
Network displacement across connecting resources.
Taking a booking on one leg prices out capacity on the legs that connect through it.
Quote-level win probability.
The customer's decision is stochastic. Price setting has to account for the acceptance curve.
The method
How each quote is priced.
Each resource on the itinerary carries an opportunity cost pi, taken from the dual of the capacity constraint in the network linear program. A request is accepted only when the fare clears the sum of what that capacity is worth elsewhere. Displacement is priced explicitly rather than discovered at month end.
Win probability is estimated per segment from quote and award history, conditioned on lane, commodity, customer, and lead time. The revenue optimum sits where marginal revenue meets marginal displacement cost, which is rarely where the rate card sits.
Nested booking limits protect high yield capacity from early low yield consumption. The classical result generalizes to the multi-resource case through the bid price surface above.
What this changes
What changes at the quote.
- 01
Displacement priced at quote time rather than discovered at month end.
- 02
Rate cards become a floor, not the answer.
- 03
Yield decisions that survive audit because the opportunity cost is explicit.
Where it runs
Sectors that lean on this capability.
If your network makes decisions under uncertainty, we should talk.
We work with a small number of operators at a time. Tell us what your network is optimizing for.
Start a conversation