The pricing of delivery services

Amiya Basu, Charles A. Ingene, Tridib Mazumdar

Research output: Contribution to journalArticle

6 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)743-772
Number of pages30
JournalJournal of Regional Science
Volume44
Issue number4
DOIs
StatePublished - Nov 1 2004

ASJC Scopus subject areas

  • Development
  • Environmental Science (miscellaneous)

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