A game-theoretic model for crowd-shipping operations with profit improvement strategies

Abstract

Taking advantage of app-based platform technologies to connect consignees and shippers, individual-based crowd-shipping (CS) services have become an emerging solution to intra-city deliveries. Compared with conventional logistics (CL) services, the individual-based CS service incentives ordinary people to use social networking to behave collaboratively for alternative deliveries. However, the interactions among several players in the intra-city delivery market with both CS and CL services are not fully investigated, so as the mutual attraction on consignees and shippers and their influences on the CS operations. Motivated by this, we propose a game-theoretic model to explore the CS operations, where indirect network effects are considered to model the mutual attractions between demands and supplies. The optimal strategies of different players are derived from this model, including the price decisions of the CS platform (fare charged from consignees and compensation paid to shippers) and the choice decisions of consignees (CS vs. CL services) and shippers (CS delivery vs. alternative activity). Results show that the indirect network effects reshape the intra-city delivery market with positive effects on the CS market share and the CS platform's profit. Viable policy implications and managerial insights for promoting CS development such as selecting target markets to launch CS services, expanding CS businesses, stimulating CS supplies, and enhancing CS services are proposed.