The Impact of Multi-Homing in a Ride-Hailing Market

15 Pages Posted: 16 May 2017 Last revised: 17 May 2017

Qihong Liu

University of Oklahoma - Department of Economics

Oksana Loginova

University of Missouri

X. Henry Wang

University of Missouri-Columbia

Date Written: May 15, 2017

Abstract

Platforms such as Uber, Lyft and Airbnb serve two-sided markets with drivers (property owners) on one side and riders (renters) on the other side. Some agents multi-home. In the case of ride-hailing, a driver may drive for both Uber and Lyft, and a rider may use both apps and request a ride from the company that has a driver close by. In this paper, we are interested in welfare implications of multi-homing in such a market. Our model abstracts away from entry/exit by drivers and riders as well as pricing by platforms. Both drivers’ and riders’ surpluses are determined by the average time between a request and the actual pickup. The benchmark setting is a monopoly platform and the direct comparison is a single-homing duopoly. The former is more efficient since it has a thicker market. Next, we consider two multi-homing settings, multi-homing on the rider side and multi-homing on the driver side respectively. Relative to single-homing duopoly, we find that multi-homing on either side improves the overall welfare. However, multi-homing drivers potentially benefit themselves at the cost of single-homing drivers. In contrast, multi-homing riders benefit themselves as well as single-homing riders, representing a more equitable distribution of gains from multi-homing.

Keywords: Ride-Hailing Platform, Two-Sided Markets, Network Externalities, Multi-Homing

JEL Classification: D85, L12, L13

Suggested Citation

Liu, Qihong and Loginova, Oksana and Wang, X. Henry, The Impact of Multi-Homing in a Ride-Hailing Market (May 15, 2017). Available at SSRN: https://ssrn.com/abstract=2968504

Qihong Liu

University of Oklahoma - Department of Economics ( email )

Norman, OK 73019-2103
United States
405-325-5846 (Phone)
405-325-5842 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/L/Qihong.Liu-1/

Oksana Loginova (Contact Author)

University of Missouri ( email )

118 Professional Building
Columbia, MO 65211
United States
1-573-882-0063 (Phone)

HOME PAGE: http://web.missouri.edu/~loginovao/

X. Henry Wang

University of Missouri-Columbia

113 Professional Building
Columbia, MO 65211
United States

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