Order Stacking in On-Demand Delivery Platforms

63 Pages Posted: 9 Oct 2024

See all articles by N. Bora Keskin

N. Bora Keskin

Duke University - Fuqua School of Business

James Scott

Duke University - Fuqua School of Business

Robert Swinney

Duke University - Fuqua School of Business

Date Written: September 04, 2024

Abstract

On-demand delivery platforms—such as restaurant delivery services—can "stack" orders, assigning orders from multiple customers to a single driver. While this typically reduces operating costs, it also impacts customers, drivers, and service providers (e.g., restaurants) by increasing delivery times and affecting their utility from participating in the platform. To investigate the implications of order stacking, we develop a model with delay-sensitive customers that endogenizes the decisions of all platform stakeholders. We first find that for an on-demand delivery market to be economically viable, order stacking should not be excessive because stacking may lead to unacceptable delays for customers. Second, it is optimal for the platform to stack some orders as long as customer valuations for the service are not too small; we derive the platform's optimal stacking level and discuss how it depends on various market conditions. Third, customers prefer more order stacking than any other market participant, including the platform, because with order stacking the platform offers a lower price to customers, which ultimately increases both the number of customers participating and their individual utility from the service. Fourth, unless the time to drop off orders is negligible or the number of available drivers is very small, the platform can earn more profits by offering direct (non-stacked) deliveries for customers that live far from the service provider. Consequently, if implemented correctly, order stacking may benefit customers and platforms alike.

Keywords: on-demand services, delivery platforms, sharing economy, order stacking, pricing

Suggested Citation

Keskin, N. Bora and Scott, James and Swinney, Robert, Order Stacking in On-Demand Delivery Platforms (September 04, 2024). Available at SSRN: https://ssrn.com/abstract=4947698 or http://dx.doi.org/10.2139/ssrn.4947698

N. Bora Keskin (Contact Author)

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States

HOME PAGE: http://faculty.fuqua.duke.edu/~nk145/

James Scott

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Robert Swinney

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

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

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