Can Two Competing On-Demand Service Platforms Be Profitable?

38 Pages Posted: 22 Aug 2022

See all articles by Jiaru Bai

Jiaru Bai

Stony Brook University

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area

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Abstract

Can two competing on-demand service platforms be profitable in equilibrium? The question is well-studied for firms competing purely on price in a single-sided market, but it is not wellunderstood for competing service platforms that use price to influence passenger demand and wage to influence driver participation in a “two-sided” market. To fill this research gap, we analyze the equilibrium structure by solving different variants of a 2-stage non-cooperative game in which both platforms use lower prices and waiting time to compete for more customers and higher wages and utilization to entice more providers to participate.

Keywords: On-Demand Economy, Non-cooperative Game, Increasing Return, network externality, Two-sided markets, Platform competition

Suggested Citation

Bai, Jiaru and Tang, Christopher S., Can Two Competing On-Demand Service Platforms Be Profitable?. Available at SSRN: https://ssrn.com/abstract=4196516 or http://dx.doi.org/10.2139/ssrn.4196516

Jiaru Bai

Stony Brook University ( email )

NY
United States

Christopher S. Tang (Contact Author)

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/x980.xml

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