Big is Green, Procompetitive, and Saves Lives: The Economics of Route Consolidation
17 Pages Posted: 28 Jun 2023 Last revised: 29 Jun 2023
Date Written: June 23, 2023
The Traveling Salesman Problem and its cousin, the Vehicle Routing Problem, are typically studied in the field of Operations as a problem of optimization. In this paper, we show how to generalize the framework to handle any economic optimization problem using the idea of opportunity cost. We prove that there is insertion order such that a “greedy” heuristic results in the minimum cost and then employ stochastic search to estimate it. We find the economies of route consolidation are large enough to offset potential anticompetitive effects for reasonable demand elasticities, and that the reduction in delivery miles results in lower costs, less pollution, and fewer accidents, injuries, and deaths.
Keywords: Travelling Salesman Problem, Vehicle Routing Problem, Economic Tradeoffs, ESG, merger effects, merger efficiencies
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