A Cost Analysis Of Amazon Prime Air (Drone Delivery)
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.
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