E-commerce, delivery drones and their impact on cities

E-commerce has gained importance over the last years and the COVID-19 pandemic has further strengthened this development. With the increasing opportunities that novel transport technologies such as cargo drones offer, e-commerce is likely to even become more attractive in upcoming years. This paper therefore analyses the long-run effects of increasing importance of e-commerce and, more specifically, the impact of a shift towards package delivery via drones. Using a polycentric urban spatial general equilibrium model that incorporates the different retail channels, we model the consumer's choice between local and online shopping. In the case of online shopping, delivery takes place either via drone or via truck. Due to the equilibrium mechanisms, changes in shopping behavior potentially result in different home and work location choices or labor supply choices. The model thus allows assessing the long-run effects of e-commerce and drone delivery, also on related markets such as the markets for land, labor and goods. A numerical simulation of the model shows that each additional retail channel adds welfare and that changes in the shopping channels result in changes in location choices of households and companies.