Chapter 16: Freight Transport Pricing Models

Freight transport prices typically increase proportionally with distance and with weight or size. Trade models traditionally apply iceberg transport costs, where the value of the good transported upon arrival is reduced by a percentage of the initial value to reflect transport and other trade costs, whereas freight charges in transport and logistics models reflect physical characteristics such as weight and distance. We also show that non-linear pricing models can be applied to build priority pricing schemes where shippers pay a surcharge for priority handling of their cargoes. Basing point pricing and unified delivered prices often used in freight transport pricing imply spatial price discrimination. Yield management developed by passenger airlines upon deregulation of the airline industry in USA has spread to air cargo. EU recent prohibition of liner conferences makes yield management more probable also in container shipping.