The Optimal Pricing Strategy for Two-Sided Platform Delivery In the Sharing Economy

Transportation Research Part E 101 1-12

25 Pages Posted: 14 Mar 2017 Last revised: 24 Apr 2018

See all articles by Ling-Chieh Kung

Ling-Chieh Kung

National Taiwan University - Department of Information Management

Guan-Yu Zhong

National Taiwan University - Department of Information Management

Date Written: February 15, 2017

Abstract

Nowadays many platforms emerge to provide delivery services by having independent shoppers to deliver groceries from independent retailers to consumers. To understand how to price this service, we formulate a two-sided platform's profit maximization problem by considering network externality. We focus on three pricing strategies, membership-based pricing, transaction-based pricing, and cross subsidization. When time discounting is absent and consumers' order frequency is price-insensitive, it is shown that these three strategies are equivalent. As membership-based pricing collects money the earliest and maximize price-sensitive order frequency, our analysis explains some platforms' promotion of it.

Keywords: sharing economy, delivery service, two-sided platform, network externality, game theory

Suggested Citation

Kung, Ling-Chieh and Zhong, Guan-Yu, The Optimal Pricing Strategy for Two-Sided Platform Delivery In the Sharing Economy (February 15, 2017). Transportation Research Part E 101 1-12, Available at SSRN: https://ssrn.com/abstract=2931383

Ling-Chieh Kung (Contact Author)

National Taiwan University - Department of Information Management ( email )

No.1,Sec. 4, Roosevelt Rd
Taipei
Taiwan

Guan-Yu Zhong

National Taiwan University - Department of Information Management ( email )

No.1,Sec. 4, Roosevelt Rd
Taipei
Taiwan

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