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Eliminating the Inconvenience of Carrying: Optimal Pricing of Delivery Service for Retailers

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  • Xiaolong Guo

    (School of Management, University of Science and Technology of China, Hefei 230026, China)

  • Ben Li

    (School of Management, University of Science and Technology of China, Hefei 230026, China)

  • Yan Liu

    (School of Management, University of Science and Technology of China, Hefei 230026, China)

  • Liang Liang

    (School of Management, Hefei University of Technology, Hefei 230009, China)

Abstract

Delivery service becomes one of the most important issues that significantly influence customer purchase behavior, especially for retailers in tourist attractions. This paper builds a model to investigate the strategy optimization of delivery service for such retailers. Meanwhile, the retailer optimizes the retail price to maximize the expected profit in different types of delivery service scenarios. Our results indicate that, given the perceived value of a delivery service, the optimal strategy is to provide free delivery service when its cost is relatively low, but to not provide delivery service when the cost is relatively high.

Suggested Citation

  • Xiaolong Guo & Ben Li & Yan Liu & Liang Liang, 2017. "Eliminating the Inconvenience of Carrying: Optimal Pricing of Delivery Service for Retailers," Service Science, INFORMS, vol. 9(3), pages 181-191, September.
    • Handle: RePEc:inm:orserv:v:9:y:2017:i:3:p:181-191
    DOI: 10.1287/serv.2017.0173
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    2. He, Bo & Mirchandani, Prakash & Shen, Qichao & Yang, Guang, 2021. "How should local Brick-and-Mortar retailers offer delivery service in a pandemic World? Self-building Vs. O2O platform," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 154(C).

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