Optimal shipping policy in retail competition and its effect on customers

Highlights：

• Free shipping benefits low-priced retailers, while calculated shipping benefits high-priced retailers.

• Any increase in the shipping fee will hurt the upstream supplier, but under some particular circumstances, it will benefit the downstream retailers.

• Equilibrium shipping strategies are Pareto-optimal for online retailers and their upstream supplier.

• The equilibrium shipping strategies could bring the highest social welfare to the society, but cannot bring the highest consumer welfare to customers.

摘要

•Free shipping benefits low-priced retailers, while calculated shipping benefits high-priced retailers.•Any increase in the shipping fee will hurt the upstream supplier, but under some particular circumstances, it will benefit the downstream retailers.•Equilibrium shipping strategies are Pareto-optimal for online retailers and their upstream supplier.•The equilibrium shipping strategies could bring the highest social welfare to the society, but cannot bring the highest consumer welfare to customers.

论文关键词：Free shipping policy,Calculated shipping policy,Game theory,Supply chain,Retail competition

论文评审过程：Received 22 June 2020, Revised 10 October 2020, Accepted 24 November 2020, Available online 28 November 2020, Version of Record 21 December 2020.