Delivery service optimization when the information on the consumers' time values is asymmetric (Q826400)

Summary: When consumers' time values are discrete and asymmetric, three delivery service schemes, which are single ordinary delivery, single expedited delivery, and a mixture of ordinary and expedited delivery, were analyzed and compared. From the perspective of the firm, the optimal lead time and price in each delivery service scheme were determined based on the principal-agent theory. The results show that when the proportion of higher time value consumers is not above a specific threshold, providing a mixture of delivery services outperforms providing single delivery services. Otherwise, providing a single expedited delivery service becomes the best choice. As the consumers' time value increases, the optimal lead time of the delivery service that is targeted to them should be decreased and the optimal price should be increased. If the firm provides a mixture of delivery services, then the optimal lead time of expedited delivery should be equal to that of the single expedited delivery scheme, while the optimal lead time of ordinary delivery should be longer than that of the single ordinary delivery scheme. Moreover, the optimal lead time of ordinary delivery in the mixed case should be increased with the proportion of higher time value consumers until it reaches the maximum length of time that all consumers could bear.