On the Necessary Conditions for Off-hour Deliveries and the Effectiveness of Urban Freight Road Pricing and Alternative Financial Policies



On the Necessary Conditions for Off-hour Deliveries and the Effectiveness of Urban Freight Road Pricing and Alternative Financial Policies

Authors

J HolguĂ­n-Veras, Rensselaer Polytechnic Institute, US

Description

This paper attempts to put together a comprehensive picture of the economic conditions needed for both carriers and receivers to make and accept deliveries outside the regular business hours (off-hour deliveries).

Abstract

This paper attempts to put together a comprehensive picture of the economic conditions needed for both carriers and receivers to make and accept deliveries outside the regular business hours (off-hour deliveries). This is accomplished by obtaining the general form of the necessary economic conditions that would make urban off-hour deliveries feasible. These necessary conditions were modified so that they become the particular forms of three key policies: freight road pricing combined with financial incentives to receivers willing to accept off-hour deliveries, only freight road pricing, and laissez faire conditions (neither freight road pricing, nor financial incentives). Two cases of industry structure are considered: independent operations (in which carrier and receivers are separate companies each independently trying to maximize profits) and integrated operations (in which carrier and receiver are part of the same company). The analyses of the necessary conditions for these policies indicate that the most potent stimulus is provided by freight road pricing in combination with financial incentives. This is followed by freight road pricing and laissez faire conditions. Using real life cost estimates, the paper concludes that neither freight road pricing by itself, nor laissez faire, are likely to achieve the desired goal of inducing a significant switch of truck traffic to the off-hours.

This paper has attempted to put together a comprehensive picture of the necessary conditions required for receivers and carriers to agree to do off-hour deliveries. This has been accomplished using economic principles. The used of these techniques has enabled to obtain the set of necessary conditions that would make off-hour deliveries feasible. These necessary conditions were modified so that they represent three key policies: freight road pricing combined with financial incentives to receivers willing to accept off-hour deliveries, only freight road pricing, and laissez faire conditions (neither freight road pricing, nor financial incentives).
Two major cases have been considered: independent and integrated carrier-receiver operations. It was found that integrated operations are significantly different than independent operations. This is because what really matters in this case are the impacts on the combined operation, as opposed to the impacts on each agent. This translates into a centralized decision making process that enables the decision maker to implement all-or-nothing alternatives, by which all deliveries or none at all are moved to the off-hours. As a result, integrated operations can take full advantage of the type of operation most beneficial to them and avoid the kind of cost duplications that arise in the case of independent operations.

The analyses of the necessary conditions for the three policies considered indicate that the most potent stimuli is provided by freight road pricing in combination with financial incentives. This is followed by freight road pricing and laissez faire conditions. Using real life cost estimates, the paper concludes that neither freight road pricing by itself, nor laissez faire are likely to achieve the desired goal of moving trucks to the off-hours.

Publisher

Association for European Transport