CASE $4-1$

Mid$-$West Trucking

Mid$-$West Trucking is a medium$-$sized TL carrier based in Des Moines, Iowa. Like many other carriers based in Iowa and surrounding states, Mid$-$West Trucking faces much demand for eastbound shipments $($because in most cases productions of goods take place in Midwest areas and consumptions take place in large cities in East Coast regions$).$ But since not much demand exists for westbound shipments $($from East Coast cites to midwestern areas$),$ the carrier had struggled with finding backhaul customers for many years. For this reason, MidWest Trucking now provides a large price discount for the westbound shipments to capture the customer demands that would otherwise not exist $($needless to say, generating a little money on backhaul is better than generating no money on backhaul$).$

The actual cost of moving a truck from a Midwest city to an East Coast city $($and vice versa$)$ is typically around $$1,000.$ But because of the uncertainty the company faces for finding backhaul customers at East Coast cities, Mid$-$West Trucking typically charges $$2,000$ for an eastbound shipment. The extra $$1,000($beyond the cost$)$ reflects the cost of backhaul $($which is less than $$1,000$ in the long run, as the company can sometimes find backhaul customers$),$ as well as the profit for the company. On the other hand, Mid$-$West Trucking charges roughly $$700$ for a westbound shipment. This means that, for westbound shipments,