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The Pricing of Delivery Services

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  • Amiya Basu
  • Charles A. Ingene
  • Tridib Mazumdar

Abstract

. Due to spatial separation between points of distribution and consumption, a vital feature of retailing is the provision of delivery services by customers, retailers, or transport intermediaries. Some store retailers, many Internet retailers, and most transport intermediaries use a multizone pricing plan or a generalized N‐zone menu plan. We extend spatial pricing theory to encompass multizone plans. We prove that the optimal number of zones varies with the level of demand relative to the spatial dispersion of customers, and with the cost of implementing a zonal plan. We show that a small number of zones capture almost all the profit attainable with a spatially discriminatory plan.

Suggested Citation

  • Amiya Basu & Charles A. Ingene & Tridib Mazumdar, 2004. "The Pricing of Delivery Services," Journal of Regional Science, Wiley Blackwell, vol. 44(4), pages 743-772, November.
    • Handle: RePEc:bla:jregsc:v:44:y:2004:i:4:p:743-772
    DOI: 10.1111/j.0022-4146.2004.00356.x
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    References listed on IDEAS

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    1. Phlips,Louis, 1983. "The Economics of Price Discrimination," Cambridge Books, Cambridge University Press, number 9780521283946, October.
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    Cited by:

    1. Ahmadi-Javid, Amir & Amiri, Elahe & Meskar, Mahla, 2018. "A Profit-Maximization Location-Routing-Pricing Problem: A Branch-and-Price Algorithm," European Journal of Operational Research, Elsevier, vol. 271(3), pages 866-881.

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