Drone logistics’ resilient development: impacts of consumer choice, competition, and regulation

Recently, drone logistics provided by many logistics service providers (LSPs) has significantly influenced consumers’ choice for last-mile delivery. Undoubtedly, drone logistics leads to more efficient deliveries and the avoidance of traffic congestion, but may incur higher operational costs and be easily impacted by government policies on drones. To figure out when should an LSP launch drone logistics and examine the impact of drone logistics on traditional logistics under airspace regulations, we develop a consumer utility model to formulate consumers’ choices, the LSPs’ profitability, and the competition dynamics between traditional and drone logistics services. We find that the introduction of drone logistics leads to intensified competition and potentially lower prices for traditional logistics. Our findings also suggest that stricter airspace regulations on drones may not deter the booming demand for drone logistics but could lead to increased service prices of traditional logistics, making the LSP's profit increase. This study uncovers the impact and value of drone logistics, thereby helping regulators better tailor policies to manage market competition and regulate drone logistics.