IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v262y2023ics0925527323001287.html
   My bibliography  Save this article

Implications of on-time delivery service with compensation for an online food delivery platform and a restaurant

Author

Listed:
  • Du, Zhong
  • Fan, Zhi-Ping
  • Chen, Zhongwei

Abstract

To reduce the negative impact of delivery delay on consumers’ willingness to pay in the online food delivery market, several online food delivery platforms have launched on-time delivery (OTD) services with compensation, in which the platforms will compensate consumers with certain fees when the delivery delay occurs. Therefore, the impact of this new practice on the profitability of platforms and restaurants needs to be understood. This study investigates the strategic decisions on whether an online food delivery platform launches the OTD service with compensation and whether a restaurant offers the service to consumers. The results show that the proportion of the service fee to the food expense (i.e., the service fee proportion), the fee that the platform compensates a consumer (i.e., the compensation fee) and the probability of delivery delay are the key factors affecting the decisions of the platform and the restaurant. Specifically, when the service fee proportion is low, it is beneficial for the platform to launch the OTD service with compensation and for the restaurant to offer the service if the compensation fee and the probability of delivery delay are not concurrently high. When the service fee proportion is high, the platform should launch the service if the compensation fee and the probability of delivery delay are moderate. When the service fee proportion is high, the restaurant does not benefit from offering the service.

Suggested Citation

  • Du, Zhong & Fan, Zhi-Ping & Chen, Zhongwei, 2023. "Implications of on-time delivery service with compensation for an online food delivery platform and a restaurant," International Journal of Production Economics, Elsevier, vol. 262(C).
    • Handle: RePEc:eee:proeco:v:262:y:2023:i:c:s0925527323001287
    DOI: 10.1016/j.ijpe.2023.108896
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527323001287
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2023.108896?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chen, Xu & Luo, Zheng & Wang, Xiaojun, 2019. "Compete or cooperate: Intensity, dynamics, and optimal strategies," Omega, Elsevier, vol. 86(C), pages 76-86.
    2. Ziv Carmon & J. George Shanthikumar & Tali F. Carmon, 1995. "A Psychological Perspective on Service Segmentation Models: The Significance of Accounting for Consumers' Perceptions of Waiting and Service," Management Science, INFORMS, vol. 41(11), pages 1806-1815, November.
    3. Tong, Tingting & Dai, Hongyan & Xiao, Qin & Yan, Nina, 2020. "Will dynamic pricing outperform? Theoretical analysis and empirical evidence from O2O on-demand food service market," International Journal of Production Economics, Elsevier, vol. 219(C), pages 375-385.
    4. Xiabing Zheng & Xiaolong Guo, 2016. "E-retailing of restaurant services: pricing strategies in a competing online environment," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(11), pages 1408-1418, November.
    5. Manlu Chen & Ming Hu & Jianfu Wang, 2022. "Food Delivery Service and Restaurant: Friend or Foe?," Management Science, INFORMS, vol. 68(9), pages 6539-6551, September.
    6. Ding, Yi & Gao, Xing & Huang, Chao & Shu, Jia & Yang, Donghui, 2018. "Service competition in an online duopoly market," Omega, Elsevier, vol. 77(C), pages 58-72.
    7. Tamer Boyaci & Saibal Ray, 2003. "Product Differentiation and Capacity Cost Interaction in Time and Price Sensitive Markets," Manufacturing & Service Operations Management, INFORMS, vol. 5(1), pages 18-36, May.
    8. Choi, Tsan-Ming & Guo, Shu & Liu, Na & Shi, Xiutian, 2020. "Optimal pricing in on-demand-service-platform-operations with hired agents and risk-sensitive customers in the blockchain era," European Journal of Operational Research, Elsevier, vol. 284(3), pages 1031-1042.
    9. (Catherine) Zhang, Jie & Savage, Scott J. & Chen, Yongmin, 2015. "Consumer uncertainty and price discrimination through online coupons: An empirical study of restaurants in Shanghai," Information Economics and Policy, Elsevier, vol. 33(C), pages 43-55.
    10. Lin, Xiaogang & Sun, Cuiying & Cao, Bin & Zhou, Yong-Wu & Chen, Chuanying, 2021. "Should ride-sharing platforms cooperate with car-rental companies? Implications for consumer surplus and driver surplus," Omega, Elsevier, vol. 102(C).
    11. Lin, Jiaxin & Zhang, Juliang & Cheng, T.C.E., 2020. "Optimal pricing and return policy and the value of freight insurance for a retailer facing heterogeneous consumers with uncertain product values," International Journal of Production Economics, Elsevier, vol. 229(C).
    12. He, Bo & Gan, Xianghua & Yuan, Kaifu, 2019. "Entry of online presale of fresh produce: A competitive analysis," European Journal of Operational Research, Elsevier, vol. 272(1), pages 339-351.
    13. Zhang, Zhe & Song, Huaming & Gu, Xiaoyu & Shi, Victor & Zhu, Jing, 2021. "How to compete with a supply chain partner: Retailer's store brand vs. manufacturer's encroachment," Omega, Elsevier, vol. 103(C).
    14. Tiaojun Xiao & Xiangtong Qi, 2016. "A two-stage supply chain with demand sensitive to price, delivery time, and reliability of delivery," Annals of Operations Research, Springer, vol. 241(1), pages 475-496, June.
    15. Du, Zhong & Fan, Zhi-Ping & Sun, Fenghao, 2023. "O2O dual-channel sales: Choices of pricing policy and delivery mode for a restaurant," International Journal of Production Economics, Elsevier, vol. 257(C).
    16. Yeo, Vincent Cheow Sern & Goh, See-Kwong & Rezaei, Sajad, 2017. "Consumer experiences, attitude and behavioral intention toward online food delivery (OFD) services," Journal of Retailing and Consumer Services, Elsevier, vol. 35(C), pages 150-162.
    17. Zhiying Tao & Qinglong Gou & Juzhi Zhang, 2020. "A local seller's app channel strategy concerning delivery," International Journal of Production Research, Taylor & Francis Journals, vol. 58(1), pages 220-255, January.
    18. Ray, Saibal & Jewkes, E. M., 2004. "Customer lead time management when both demand and price are lead time sensitive," European Journal of Operational Research, Elsevier, vol. 153(3), pages 769-781, March.
    19. Guan, Zili & Zhang, Xumei & Zhou, Maosen & Dan, Yiran, 2020. "Demand information sharing in competing supply chains with manufacturer-provided service," International Journal of Production Economics, Elsevier, vol. 220(C).
    20. Jingmei Xu & Li Hu & Xiaolong Guo & Xia Yan, 2020. "Online cooperation mechanism: game analysis between a restaurant and a third-party website," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(1), pages 61-73, February.
    21. Marlin W. Ulmer & Barrett W. Thomas & Ann Melissa Campbell & Nicholas Woyak, 2021. "The Restaurant Meal Delivery Problem: Dynamic Pickup and Delivery with Deadlines and Random Ready Times," Transportation Science, INFORMS, vol. 55(1), pages 75-100, 1-2.
    22. Liu, Weijun & Florkowski, Wojciech J., 2018. "Online Meal delivery services: Perception of service quality and delivery speed among Chinese consumers," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266866, Southern Agricultural Economics Association.
    23. Xu, Xiaoping & Zhang, Mian & He, Ping, 2020. "Coordination of a supply chain with online platform considering delivery time decision," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    24. He, Zhou & Han, Guanghua & Cheng, T.C.E. & Fan, Bo & Dong, Jichang, 2019. "Evolutionary food quality and location strategies for restaurants in competitive online-to-offline food ordering and delivery markets: An agent-based approach," International Journal of Production Economics, Elsevier, vol. 215(C), pages 61-72.
    25. Eric T. Anderson, 2002. "Sharing the Wealth: When Should Firms Treat Customers as Partners?," Management Science, INFORMS, vol. 48(8), pages 955-971, August.
    26. Zhang, Peng & He, Yong & Zhao, Xuan, 2019. "“Preorder-online, pickup-in-store” strategy for a dual-channel retailer," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 27-47.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wan Qin & Peng Yuhan & Yu Cuiting & Huang Yu & Liu Danping, 2023. "Optimal Strategies of the Online-to-Offline Instant Delivery Service of Grocery Retailers," SAGE Open, , vol. 13(4), pages 21582440231, December.
    2. Wang, Jinting & Guo, Pengfei & Wang, Yilin & Zhang, Lingjiao, 2024. "How should restaurants operate in the omnichannel era? A queueing game approach," International Journal of Production Economics, Elsevier, vol. 274(C).
    3. Liu, Minjian & Du, Shaofu & Nie, Tengfei & Zhu, Yangguang, 2024. "Pricing, channel design, and platform operations with buy-online-and-pick-up-in-store in online food delivery market," International Journal of Production Economics, Elsevier, vol. 274(C).
    4. Ma, Shigui & He, Yong & Gu, Ran & Yeh, Chung-Hsing, 2024. "How to cooperate in a three-tier food delivery service supply chain," Journal of Retailing and Consumer Services, Elsevier, vol. 79(C).
    5. Jo, Hanseul & Shin, Jungwoo, 2024. "Evidence-based equilibrium analysis of two-sided market in food delivery industry," Journal of Retailing and Consumer Services, Elsevier, vol. 77(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Du, Zhong & Fan, Zhi-Ping & Sun, Fenghao, 2023. "O2O dual-channel sales: Choices of pricing policy and delivery mode for a restaurant," International Journal of Production Economics, Elsevier, vol. 257(C).
    2. Ma, Shigui & He, Yong & Gu, Ran & Yeh, Chung-Hsing, 2024. "How to cooperate in a three-tier food delivery service supply chain," Journal of Retailing and Consumer Services, Elsevier, vol. 79(C).
    3. Yang, Yang & Liu, Jie & Hu, Taizhong, 2023. "Capital allocation and pricing decisions under trade credit with time-sensitive stochastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 173(C).
    4. Zhong, Yuanguang & Lan, Yibo & Chen, Zhi & Yang, Jiazi, 2023. "On-demand ride-hailing platforms with heterogeneous quality-sensitive customers: Dedicated system or pooling system?," Transportation Research Part B: Methodological, Elsevier, vol. 173(C), pages 247-266.
    5. Hammami, Ramzi & Frein, Yannick & Nouira, Imen & Albana, Abduh-Sayid, 2022. "On the interplay between local lead times, overall lead time, prices, and profits in decentralized supply chains," International Journal of Production Economics, Elsevier, vol. 243(C).
    6. Geng Sun & Yeongin Kim & Yinliang (Ricky) Tan & Geoffrey G. Parker, 2024. "Dinner at Your Doorstep: Service Innovation via the Gig Economy on Food Delivery Platforms," Information Systems Research, INFORMS, vol. 35(3), pages 1216-1234, September.
    7. He, Peng & He, Yong & Tang, Xiaoying & Ma, Shigui & Xu, Henry, 2022. "Channel encroachment and logistics integration strategies in an e-commerce platform service supply chain," International Journal of Production Economics, Elsevier, vol. 244(C).
    8. Jingmei Xu & Li Hu & Xiaolong Guo & Xia Yan, 2020. "Online cooperation mechanism: game analysis between a restaurant and a third-party website," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(1), pages 61-73, February.
    9. Zhou, Xiaoyang & Liu, He & Li, Jialu & Zhang, Kai & Lev, Benjamin, 2023. "Channel strategies when digital platforms emerge: A systematic literature review," Omega, Elsevier, vol. 120(C).
    10. Hammami, Ramzi & Frein, Yannick & Albana, Abduh S., 2020. "Delivery time quotation and pricing in two-stage supply chains: Centralized decision-making with global and local managerial approaches," European Journal of Operational Research, Elsevier, vol. 286(1), pages 164-177.
    11. Sayid Albana, Abduh & Frein, Yannick & Hammami, Ramzi, 2018. "Effect of a lead time-dependent cost on lead time quotation, pricing, and capacity decisions in a stochastic make-to-order system with endogenous demand," International Journal of Production Economics, Elsevier, vol. 203(C), pages 83-95.
    12. Li, Leiting & Huang, Min & Yue, Xiaohang & Wang, Xingwei, 2024. "The strategic analysis of collection delivery points network sharing in last-mile logistics market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 183(C).
    13. Qin, Xuelian & Liu, Zhixue & Tian, Lin, 2021. "The optimal combination between selling mode and logistics service strategy in an e-commerce market," European Journal of Operational Research, Elsevier, vol. 289(2), pages 639-651.
    14. Daniel Belanche & Luis V. Casaló & Carlos Flavián & Alfredo Pérez-Rueda, 2021. "The role of customers in the gig economy: how perceptions of working conditions and service quality influence the use and recommendation of food delivery services," Service Business, Springer;Pan-Pacific Business Association, vol. 15(1), pages 45-75, March.
    15. Zhang, Jian & Woensel, Tom Van, 2023. "Dynamic vehicle routing with random requests: A literature review," International Journal of Production Economics, Elsevier, vol. 256(C).
    16. Jayaswal, Sachin & Jewkes, Elizabeth & Ray, Saibal, 2011. "Product differentiation and operations strategy in a capacitated environment," European Journal of Operational Research, Elsevier, vol. 210(3), pages 716-728, May.
    17. Xu, Xiaoping & Zhang, Mian & He, Ping, 2020. "Coordination of a supply chain with online platform considering delivery time decision," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    18. Jayaswal, Sachin, 2014. "Priority Service System Optimization under Service Level Constraints," IIMA Working Papers WP2014-08-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    19. Abhijit Upasani & Reha Uzsoy, 2008. "Incorporating manufacturing lead times in joint production-marketing models: A review and some future directions," Annals of Operations Research, Springer, vol. 161(1), pages 171-188, July.
    20. Wang, Jinting & Guo, Pengfei & Wang, Yilin & Zhang, Lingjiao, 2024. "How should restaurants operate in the omnichannel era? A queueing game approach," International Journal of Production Economics, Elsevier, vol. 274(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:262:y:2023:i:c:s0925527323001287. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.