Strategic Expectation Setting of Delivery Time in Platform Marketplaces

Abstract

Delivery speed is an essential component of the service provided by online delivery platforms. Since improving delivery speed is expensive, platforms can give the appearance of faster delivery by showing a conservative estimate of the delivery duration when the consumer makes an order. We use detailed transaction-level data from a hyper-local food delivery platform to examine the effects of setting delivery speed expectations on consumer's likelihood of future purchases and restaurant choices. When delivery is faster than expected, we find that consumers are more likely to purchase again from the platform. However, the perception of a quicker delivery may not benefit the restaurant that served the order, as consumers may explore other restaurants while buying more from the platform. We find that consumers become more likely to buy from the restaurant that served their order and less likely to purchase from other restaurants. We also find evidence that more experienced consumers are less influenced by delivery performance. We further find that, in line with theory, an increase in consumer satisfaction is the likely reason for the observed behavior.