Reducing Traffic Incidents in Meal Delivery: Penalize the Platform or its Independent Drivers?

46 Pages Posted: 29 Sep 2022

See all articles by Wenchang Zhang

Wenchang Zhang

Indiana University, Kelley School of Business

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area

Liu Ming

The Chinese University of Hong Kong, Shenzhen

Yue Cheng

HSBC Business School, Peking University

Date Written: September 28, 2022

Abstract

To incentivize on-time delivery performance, meal delivery platforms often penalize their drivers for late deliveries. However, fierce competition forces these platforms to quote short meal delivery times. But shorter delivery times create extra pressure for drivers to drive at excessive speeds to avoid being penalized for late deliveries, causing otherwise avoidable traffic violations and accidents. To curb reckless driving behaviors, the Chinese government imposed an additional penalty for traffic incidents committed by meal delivery drivers. But this attempt was not effective because the number of traffic violations and accidents among meal delivery drivers has not abated. There is now ongoing debate about whether the government should penalize the platform for quoting shorter delivery times, which may be indirectly causes such traffic violations and accidents.

This backdrop motivates us to examine the following research questions: How should a profit-maximizing platform determine its quoted delivery times, its payment to independent drivers, and the late delivery penalty associated with a given government policy? How should a welfare-maximizing government determine its penalty policy to curb traffic incidents? By analyzing a three-stage Stackelberg game, we establish the following results. First, imposing an incident penalty on drivers will backfire: It can push the platform to quote shorter delivery times. Second, imposing an incident penalty on the platform will help: It provides an incentive for the platform to quote longer delivery times, which will ultimately reduce traffic violations and accidents. Third, it is optimal for the government to penalize the platform for traffic violations and accidents, but not its drivers. Our findings provide insights that will stimulate stakeholders’ discussions about improving public safety: Taking our results into consideration, the local government has started working on new regulations that can hold platforms accountable.

Keywords: Meal delivery platforms, Penalty system, Public safety, Traffic violations and accidents

Suggested Citation

Zhang, Wenchang and Tang, Christopher S. and Ming, Liu and Cheng, Yue, Reducing Traffic Incidents in Meal Delivery: Penalize the Platform or its Independent Drivers? (September 28, 2022). Kelley School of Business Research Paper No. 2022-09, Available at SSRN: https://ssrn.com/abstract=4231746

Wenchang Zhang (Contact Author)

Indiana University, Kelley School of Business ( email )

Business 670
1309 E. Tenth Street
Bloomington, IN 47401
United States

HOME PAGE: http://www.wenchangzhang.com/

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/x980.xml

Liu Ming

The Chinese University of Hong Kong, Shenzhen ( email )

Shenzhen, Guangdong 518172
China

Yue Cheng

HSBC Business School, Peking University

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
61
Abstract Views
222
rank
502,396
PlumX Metrics