Dynamic Confirmation, Compensation and Routing for Combined Urban Transportation of Passengers and Parcels

Passengers and parcels have long been served by separate vehicle fleets in urban areas. This study investigates the integration of parcel delivery and passenger ride services by a single fleet of mobility-on-demand companies. While this integration holds significant promise for enhancing profitability, it poses a challenge for operational sustainability: the detours required for parcel deliveries could adversely affect the passenger experience. We explore the viability of offering compensations as incentives for detours in a dynamic and stochastic environment. In this scenario, service requests are received dynamically, and the passengers’ acceptance of detours remains uncertain. We propose an innovative anticipatory policy, which integrates confirmation, compensation, and routing decisions. The proposed policy is underpinned by a novel regression-tree-based value function approximation. The numerical experiments have validated the efficacy of proposed policy. Moreover, we also explore the advantage of this combined transportation, which could effectively enhance profitability with few marginal costs. The study serves as a valuable reference for mobility-on-demand companies regarding the combined transportation of passengers and parcels. Funding: This work was supported by Research Grants Council of the Hong Kong Special Administrative Region, China [Grant PolyU 15222822]; Department of Industrial and Systems Engineering, Hong Kong Polytechnic University [Grant 4-ZZSF]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/trsc.2024.0827 .