Eliminating the Inconvenience of Carrying: Optimal Pricing of Delivery Service for Retailers

Abstract

Delivery service becomes one of the most important issues that significantly influence customer purchase behavior, especially for retailers in tourist attractions. This paper builds a model to investigate the strategy optimization of delivery service for such retailers. Meanwhile, the retailer optimizes the retail price to maximize the expected profit in different types of delivery service scenarios. Our results indicate that, given the perceived value of a delivery service, the optimal strategy is to provide free delivery service when its cost is relatively low, but to not provide delivery service when the cost is relatively high.

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