UBC Theses and Dissertations

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UBC Theses and Dissertations

Delivery service assortment and product pricing in online retailing : the impact of pricing flexibility and customer rating Yu, Junhao


This research studies the delivery service assortment and product pricing problem in the context of online retailing where the seller selects a series of delivery options from a set of available alternatives for the customers to choose from and decides the price for the product and the listed surcharge for each delivery service. We aim to examine the impact of seller's pricing flexibility and customer rating on the optimal decisions and the optimal expected profit of the seller. By solving and comparing the results of four related problems, we find that usually it would be optimal for the seller to include all the available delivery options and charge a constant mark-up for all the options. But when the customer rating is aggregated, the seller would have to solve a combinatorial optimization problem to find out the optimal assortment when pricing is restricted to the product only and he should differentiate the mark-up for each option when he enjoys the pricing flexibility to re-price the quoted surcharges. We also show that two simple heuristic algorithms provide very good performance for the mentioned combinatorial optimization problem. We explain why the aggregated rating would only hurt the seller and how pricing flexibility could remove its negative effect while assortment adjustment can only weaken its impact. In addition, numerical studies present the comparison between the two main problems with aggregated customer rating and provide some observations of the impact on delivery service providers and the customers. The findings in this thesis yield useful managerial insights for the delivery service providers as well as the seller for making their strategic decisions.

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Attribution-NonCommercial-NoDerivs 2.5 Canada