Coordinate Package Delivery and On-Demand Rides: A Zoning Policy and Analysis

50 Pages Posted: 28 Sep 2023 Last revised: 3 May 2024

See all articles by Junyu Cao

Junyu Cao

University of Texas at Austin - McCombs School of Business

Sheng Liu

Rotman School of Management

Date Written: September 7, 2023

Abstract

Cities are facing mounting pressure from the surging demand for package delivery and on-demand ride services. Meanwhile, more drivers are empowered by platforms to provide flexible transportation and logistics services with their own vehicles. Integrating freight and passenger transportation services, termed co-modality, has been promoted as a promising means to improve vehicle utilization, driver productivity, and logistics efficiency. Motivated by these issues, we investigate the value of co-modality to the driver in the context of joint package delivery and ride-hailing from a revenue-maximizing perspective. The driver must decide when and how on-demand ride jobs should be coordinated with package deliveries. Because the general optimal coordination problem is intractable, we develop a zoning-based coordination policy that allows us to capture the synergies between these two types of jobs and characterize its revenue performance analytically. We find that the optimal policy reduces to three forms: the pure package delivery policy, the four-zone policy (limited ride opportunity), and the switching policy (flexible ride opportunity). We show that co-modality is most beneficial when the package volume is relatively low. Offering limited flexibility is optimal when the ride profit and package volume are moderate. In the limit, the zoning-based coordination policy scales similarly to the pure package delivery policy and enjoys a bounded performance ratio to the perfect coordination policy. We also complement our analysis using numerical studies based on taxi data from New York City and discuss the practical implications.

Keywords: logistics, co-modality, ride-hailing, transportation

Suggested Citation

Cao, Junyu and Liu, Sheng, Coordinate Package Delivery and On-Demand Rides: A Zoning Policy and Analysis (September 7, 2023). Available at SSRN: https://ssrn.com/abstract=4565248 or http://dx.doi.org/10.2139/ssrn.4565248

Junyu Cao (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX
United States

Sheng Liu

Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada

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