The Pricing of Delivery Services

30 Pages Posted: 18 Oct 2004

See all articles by Amiya K. Basu

Amiya K. Basu

Syracuse University - Whitman School of Management

Tridib Mazumdar

Syracuse University - Whitman School of Management

Charles A. Ingene

University of Mississippi - School of Business Administration

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.

Suggested Citation

Basu, Amiya K. and Mazumdar, Tridib and Ingene, Charles A., The Pricing of Delivery Services. Journal of Regional Science, Vol. 44, No. 4, pp. 743-772, November 2004. Available at SSRN: https://ssrn.com/abstract=605191

Amiya K. Basu (Contact Author)

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

Tridib Mazumdar

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

Charles A. Ingene

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

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