E-Commerce, Delivery Drones and Their Impact on Cities

E-commerce has gained importance over the last years and the COVID-19 pandemic has further strengthened this development. With the increasing opportunities that novel transport technologies, amongst them cargo drones, offer e-commerce is likely to even become more attractive in upcoming years. This paper therefor analyses the long-run effects of increasing importance of e-commerce and even more specifically the impact of a shift towards package delivery via drones. Using a polycentric urban spatial general equilibrium model, incorporating the different retail channels, we model the consumer’s choice between local shopping, online shopping and delivery via drone and online shopping and delivery via truck. Due to the equilibrium mechanisms changes in shopping behavior potentially result in different home and work location choices or labor supply choice. The model hence allows to assess the long run effects of e-commerce and drone delivery also on related markets such as the markets for land, labor and goods. A numerical simulation of the model shows that each additional retail channel adds welfare and that changes in the shopping channels results in long-run changes of location choices of households and companies.

Straubinger, Anna, Henri L.F. de Groot and Erik T. Verhoef (2022), E-Commerce, Delivery Drones and Their Impact on Cities, SSRN Working Papers.