4.2. Shipper problem
Shippers determine the optimal production, shipment and consumption pattern using SPE. Shippers
choose a sequence of carriers considering the carriers' pricing and routing decisions to deliver their
products to final destinations. Shippers take into account transportation service charges and delivery
routes and times for ocean transportation, port operations and land transportation. According to the SPE
principle, if the commodity price (supply cost) in the origin market plus the average transaction cost on
the path connecting origin and destination markets is equivalent to the commodity price (demand cost) in
the destination market, there will be commodity flow on the path.
The average path transaction cost comprises the transportation cost and tariff depending on the flow.
The average path transaction cost is the expense to deliver a unit of freight via the path connecting origin
and destination markets. The function is a linear combination of the following two attributes: a) the sum
of the average link transportation cost functions if the shipper link is on the shipper path and b) tariff
according to the commodity type.