The economics of empty trips

Abstract

Empty trucks have a significant impact on the efficiency and sustainability of logistics operations, accounting for a substantial portion of the intercity truck flow, ranging from 15% to 40%. While some of these empty trips can be attributed to load imbalances, it is common to observe the flow of empty trucks in both directions of a route. This paper introduces a microeconomic model aimed at providing a deeper understanding of the flow of empty vehicles beyond load imbalances and its implications for freight flows, transport prices, and the number of carriers in the free-entry equilibrium. Our approach captures shippers’ preferences when selecting carriers within a system comprising two locations with cargo flow in both directions. The model incorporates price competition among carriers and the production of differentiated services, as shippers perceive carriers’ services in a heterogeneous manner. Given that carriers lack knowledge of shippers’ preferences, these are represented using a random utility model. The model enables the determination and comparison of equilibrium conditions with the social optimum. The results show that: (1) The transportation of goods results in not only empty vehicles due to imbalanced loads but also a natural occurrence of empty vehicles due to the stochastic demand patterns. (2) When a new carrier enters the market, it contributes to the negative impact of empty vehicles through the business stealing effect. (3) Empty trips disrupt the balance of prices and carriers, creating a gap between the free-entry equilibrium and the socially optimal values. (4) By coordinating carriers’ operations, the flow of empty vehicles due to the business stealing effect can be minimized, moving the system towards the socially optimal outcome.