Competition and Coopetition for Two-sided Platforms

46 Pages Posted: 30 Aug 2017 Last revised: 10 Aug 2018

Maxime Cohen

New York University (NYU) - Leonard N. Stern School of Business

Renyu (Philip) Zhang

New York University Shanghai

Date Written: August 28, 2017

Abstract

Two-sided platforms have become omnipresent (e.g., ride-sharing and on-demand delivery services). In this context, firms compete not only for customers but also for flexible self-scheduling workers who can work for multiple platforms. We consider a setting where two-sided platforms simultaneously choose their prices and wages to compete for both sides of the market. We assume that customers and workers each follow a Multinomial Logit choice model (our results also extend to more general models), and show that a unique equilibrium exists and can be obtained using a tatonnement scheme. The proof technique for the competition between two-sided platforms is not a simple extension of the traditional (one-sided) setting and involves different arguments. Armed with this result, we study the impact of coopetition between two-sided platforms, i.e., the business strategy of cooperating with competitors. Motivated by recent practice in the ride-sharing industry, we analyze a setting where two competing platforms engage in a profit sharing contract by introducing a new joint service. We show that a well-designed profit sharing contract will benefit every single party in the market (riders, drivers, and both platforms).

Keywords: Two-sided platforms, ride-sharing, coopetition, choice models

Suggested Citation

Cohen, Maxime and Zhang, Renyu (Philip), Competition and Coopetition for Two-sided Platforms (August 28, 2017). Available at SSRN: https://ssrn.com/abstract=3028138 or http://dx.doi.org/10.2139/ssrn.3028138

Maxime Cohen (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

Renyu Zhang

New York University Shanghai ( email )

1555 Century Avenue
Shanghai, 200122
China
86-21-20595135 (Phone)

HOME PAGE: http://www.nyu.edu/projects/rzhang/index.htm

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