To offer or not to offer? The optimal value-insured strategy for crowdsourced delivery platforms

Abstract

Value-insured services are widely used to reduce senders’ perceived risk in crowdsourced delivery. However, research has not examined whether and how the value-insured strategy provided by crowdsourced delivery platforms (CDPs) affects those platforms’ decisions and the participation behaviors of two-sided users (senders and couriers). In this study, we develop game-theoretic models for a CDP’s pricing and wage decisions when it offers value-insured services and when it does not. Moreover, we compare the CDP’s optimal decisions under three insurance scenarios, i.e., a revenue-sharing scheme, fixed-fee scheme, and reinsurance scheme, to explore the optimal insurance scheme for the CDP. We find that introducing a value-insured strategy will benefit the CDP only when the couriers’ sensitivity to the declared value of the delivered parcel is adequate. When the average declared value is below a certain threshold, the reinsurance scheme produces the highest CDP’s profit; otherwise, the fixed-fee scheme leads to the highest CDP’s profit. We also show that offering a value-insured service does not always increase consumer surplus, labor welfare, and social welfare, and although it increases the CDP’s price level, it is not necessarily beneficial to the CDP. Our findings provide strong support for CDPs’ decision-making.