Quality and Pricing of Delivery Services in the E-commerce Sector.

Summary We study the delivery market for e-commerce products, with two technologies: home delivery and delivery to a relay point. Taste differences for these are represented by a Hotelling model. Operators choose the (costly) quality of their delivery service. We study a single operator who uses both technologies and a duopoly with two single-technology operators. The home delivery operator may or may not be regulated. the relay operator is not regulated. We study pricing policies and the impact of competition on welfare. We also show that quality regulation may have an adverse effect on welfare.