A Theory of Multihoming in Rideshare Competition

15 Pages Posted: 16 Jul 2018

See all articles by Kevin Bryan

Kevin Bryan

University of Toronto - Strategic Management

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Multiple version iconThere are 2 versions of this paper

Date Written: July 2018

Abstract

We examine competition amongst ridesharing platforms where firms compete by choosing both the price of rides and the extent of idleness. Idleness means drivers who are compensated without picking up passengers, instead acting to reduce passenger wait time. We show that when consumers are the only agents who multihome, idleness falls compared with when they 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.

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Suggested Citation

Bryan, Kevin and Gans, Joshua S., A Theory of Multihoming in Rideshare Competition (July 2018). NBER Working Paper No. w24806. Available at SSRN: https://ssrn.com/abstract=3214350

Kevin Bryan (Contact Author)

University of Toronto - Strategic Management ( email )

Canada

Joshua S. Gans

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

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Cambridge, MA 02138
United States

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