Project Director

Hutchinson, Bruce

Department Examiner

Brown, Leanora; McLean, Aldo; Dumas, Joe

Department

Dept. of Economics

Publisher

University of Tennessee at Chattanooga

Place of Publication

Chattanooga (Tenn.)

Abstract

This paper analyzes the costs and benefits of the newly proposed Amazon Prime Air delivery system that uses drone technology to deliver packages to customers’ doorsteps. The paper sets forth a benefit-cost analytical framework to examine the technology for the benefits of labor-saving technology, faster delivery, and the advantage of being first versus the costs of operating the drone system. This analysis is conducted by modeling the Prime Air system for 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. Amazon’s goal is to increase its profitability through the application of new technology resulting in a better product (a delivery system) for a subset of its customers. Through this analysis, the paper weighs the potential costs and benefits associated with the innovation and implementation of the Prime Air drone delivery system. This analysis will determine if delivery by drone is more cost effective than ground delivery as well as how Amazon could gain revenue to fund the system. As discussed, the drone delivery system has the potential to give Amazon a comparative advantage over its competitors as well as revolutionize the transportation and delivery industries.

Degree

B. S.; An honors thesis submitted to the faculty of the University of Tennessee at Chattanooga in partial fulfillment of the requirements of the degree of Bachelor of Science.

Date

5-2015

Subject

Amazon.com (Firm) -- History; Electronic commerce -- United States; Delivery of goods -- United States; Drone aircraft -- United States

Keyword

Drones; Amazon; Cost-Benefit Analysis; Prime Air; Drone delivery; labor saving technology

Discipline

Economics

Document Type

Theses

Extent

53 leaves

Language

English

Rights

Under copyright.

License

http://creativecommons.org/licenses/by-nc-nd/3.0/

Included in

Economics Commons

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