Big is Green, Procompetitive, and Saves Lives: The Economics of Route Consolidation

17 Pages Posted: 28 Jun 2023 Last revised: 29 Jun 2023

See all articles by Luke M. Froeb

Luke M. Froeb

Vanderbilt University - Owen Graduate School of Management

Mark Lane

TensorX

Ed Powell

TensorX

Mikhael Shor

University of Connecticut Department of Economics

Steven Tschantz

Vanderbilt University - Department of Mathematics

Date Written: June 23, 2023

Abstract

The Traveling Salesman Problem and its cousin, the Vehicle Routing Problem, are typically studied in the field of Operations as a problem of optimization. In this paper, we show how to generalize the framework to handle any economic optimization problem using the idea of opportunity cost. We prove that there is insertion order such that a “greedy” heuristic results in the minimum cost and then employ stochastic search to estimate it. We find the economies of route consolidation are large enough to offset potential anticompetitive effects for reasonable demand elasticities, and that the reduction in delivery miles results in lower costs, less pollution, and fewer accidents, injuries, and deaths.

Keywords: Travelling Salesman Problem, Vehicle Routing Problem, Economic Tradeoffs, ESG, merger effects, merger efficiencies

Suggested Citation

Froeb, Luke M. and Lane, Mark and Powell, Ed and Shor, Mikhael and Tschantz, Steven T., Big is Green, Procompetitive, and Saves Lives: The Economics of Route Consolidation (June 23, 2023). Available at SSRN: https://ssrn.com/abstract=4489828 or http://dx.doi.org/10.2139/ssrn.4489828

Luke M. Froeb (Contact Author)

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-322-9057 (Phone)
615-343-7177 (Fax)

Mark Lane

TensorX

Ed Powell

TensorX ( email )

20 Burton Hills Blvd
Nashville, TN 37215
United States

Mikhael Shor

University of Connecticut Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

HOME PAGE: http://www.mikeshor.com/

Steven T. Tschantz

Vanderbilt University - Department of Mathematics ( email )

Nashville, TN 37240
United States

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