 Dynamic pricing of multiple home delivery optionsKursad Asdemir, Varghese S. Jacob and Ramayya Krishnan European Journal of Operational Research, 2009, vol. 196, issue 1, 246-257 Abstract: Online grocers accept delivery bookings and have to deliver groceries to consumers' residences. Grocery stores operate on very thin margins. Therefore, a critical question that an online grocery store needs to address is the cost of home delivery operations. In this paper, we develop a Markov decision process-based pricing model that recognizes the need to balance utilization of delivery capacity by the grocer and the need to have the goods delivered at the most convenient time for the customer. The model dynamically adjusts delivery prices as customers arrive and make choices. The optimal prices have the following properties. First, the optimal prices are such that the online grocer gains the same expected payoff in the remaining booking horizon, regardless of the delivery option independently chosen by a consumer. Second, with unit order sizes, delivery prices can increase due to dynamic substitution effects as there is less time left in the booking horizon. Keywords: Pricing; E-commerce; Dynamic; programming; Revenue; management (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:196:y:2009:i:1:p:246-257 Access Statistics for this article European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati More articles in European Journal of Operational Research from Elsevier |
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