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A Cost Analysis of Amazon Prime Air (Drone Delivery)

Author

Listed:
  • Adrienne Welch Sudbury
  • E. Bruce Hutchinson

Abstract

This paper estimates the costs of the Prime Air delivery system proposed by Amazon.com, Inc. that uses drone technology to deliver packages to customers’ doorsteps. The paper sets forth a benefit-cost analytical framework to examine the labor-saving technology of the drone system by modeling the Prime Air system in Chattanooga, TN. The model addresses FAA regulations, drone design, logistics, and related factors to predict how Amazon might set up and operate the drone system. Cost savings per package delivered of one-third or more relative to ground delivery, exclusive of R & D costs, seem feasible.

Suggested Citation

  • Adrienne Welch Sudbury & E. Bruce Hutchinson, 2016. "A Cost Analysis of Amazon Prime Air (Drone Delivery)," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 16(1), pages 1-12, Fall.
    • Handle: RePEc:mts:jrnlee:v:16:y:2016:i:1:p:1-12
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    File URL: http://capone.mtsu.edu/jee/2016/pp1-12ms615.pdf
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    Citations

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    Cited by:

    1. Jacek Buko & Marek Bulsa & Adam Makowski, 2022. "Spatial Premises and Key Conditions for the Use of UAVs for Delivery of Items on the Example of the Polish Courier and Postal Services Market," Energies, MDPI, vol. 15(4), pages 1-17, February.
    2. Lemardelé, Clément & Estrada, Miquel & Pagès, Laia & Bachofner, Mónika, 2021. "Potentialities of drones and ground autonomous delivery devices for last-mile logistics," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    3. Jeng-Shyang Pan & Pei-Cheng Song & Shu-Chuan Chu & Yan-Jun Peng, 2020. "Improved Compact Cuckoo Search Algorithm Applied to Location of Drone Logistics Hub," Mathematics, MDPI, vol. 8(3), pages 1-19, March.
    4. Chen, Heng & Hu, Zhangchen & Solak, Senay, 2021. "Improved delivery policies for future drone-based delivery systems," European Journal of Operational Research, Elsevier, vol. 294(3), pages 1181-1201.

    More about this item

    Keywords

    cost-benefit framework; drone delivery system; new technology;
    All these keywords.

    JEL classification:

    • D29 - Microeconomics - - Production and Organizations - - - Other
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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