Traditional cost calculations do not accurately estimate the opportuni
ty costs of using conveyances in intermodal operations, thus, results
in many short-term pricing problems. The objective of this research is
to develop a framework for estimating the opportunity costs of using
conveyances in trailer-on-flatcar (TOFC) operations to assist carriers
in improving their pricing strategies under highly competitive market
conditions. The framework is based on a network model that simulates
current operations in order to find the reduced costs and the opportun
ity costs of serving the loads. The network model is formulated as a l
inear network flow problem with side constraints. To find the reduced
costs, a technique using Lagrangian Relaxation, a minimum cost algorit
hm, and a shortest path algorithm were developed in the research. We i
llustrate this model with a case study of a major north American railr
oad. The results show that opportunity costs do affect the accuracy of
calculated system contributions for services. Moreover, the opportuni
ty costs and system incremental costs (SICs) are unstable over time. T
o handle the instability we make use of a new risk-pricing approach.