A Theory of Multihoming in Rideshare Competition
14 Pages Posted: 26 Jul 2018 Last revised: 3 Aug 2018
Date Written: July 27, 2018
We examine competition amongst ridesharing platforms, where firms compete on both price and the wait time induced with idled drivers. We show that when consumers are the only agents who multihome, idleness is lower in duopoly than when consumers face a monopoly ridesharing platform. When drivers and consumers multihome, idleness further falls to zero as it involves costs for each platform that are appropriated, in part, by their rival. Interestingly, socially superior outcomes may involve monopoly or competition under various multihoming regimes, depending on the density of the city, and the relative costs of idleness versus consumer disutility of waiting.
Keywords: platform, ridesharing, idleness
JEL Classification: L13, L51
Suggested Citation: Suggested Citation