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Pricing for delivery time flexibility

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  • Yildiz, Baris
  • Savelsbergh, Martin

Abstract

We study a variant of the multi-period vehicle routing problem, in which a service provider offers a discount to customers in exchange for delivery flexibility. We establish theoretical properties and empirical insights regarding the intricate and complex relation between the benefit from additional delivery flexibility, the discounts offered to customers to gain additional delivery flexibility, and the likelihood of acceptance of discount offers by customers. Computational experiments, using an exact dynamic programming algorithm show that, depending on the setting, cost savings exceeding 30% can be achieved.

Suggested Citation

  • Yildiz, Baris & Savelsbergh, Martin, 2020. "Pricing for delivery time flexibility," Transportation Research Part B: Methodological, Elsevier, vol. 133(C), pages 230-256.
    • Handle: RePEc:eee:transb:v:133:y:2020:i:c:p:230-256
    DOI: 10.1016/j.trb.2020.01.004
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    References listed on IDEAS

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    1. Reyes, Damián & Erera, Alan L. & Savelsbergh, Martin W.P., 2018. "Complexity of routing problems with release dates and deadlines," European Journal of Operational Research, Elsevier, vol. 266(1), pages 29-34.
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    Cited by:

    1. Waßmuth, Katrin & Köhler, Charlotte & Agatz, Niels & Fleischmann, Moritz, 2023. "Demand management for attended home delivery—A literature review," European Journal of Operational Research, Elsevier, vol. 311(3), pages 801-815.
    2. Keskin, Merve & Branke, Juergen & Deineko, Vladimir & Strauss, Arne K., 2023. "Dynamic multi-period vehicle routing with touting," European Journal of Operational Research, Elsevier, vol. 310(1), pages 168-184.
    3. He, Dongdong & Guan, Wei, 2023. "Promoting service quality with incentive contracts in rural bus integrated passenger-freight service," Transportation Research Part A: Policy and Practice, Elsevier, vol. 175(C).
    4. Xiaoqin Wen & Chenhanzhi Wang, 2022. "Optimal-Quality Choice and Committed Delivery Time in Build-To-Order Supply Chain," Sustainability, MDPI, vol. 14(18), pages 1-20, September.
    5. Agatz, N.A.H. & Fleischmann, M., 2023. "Demand Management for Sustainable Supply Chain Operations," ERIM Report Series Research in Management ERS-2023-001-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

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