Pricing, Quality and Competition at On-Demand Healthcare Service Platforms

29 Pages Posted: 28 Sep 2018

See all articles by Yixuan Liu

Yixuan Liu

University of Texas at Austin, Red McCombs School of Business, Department of Information, Risk and Operations Management

Xiaofang Wang

Renmin University of China

Stephen Gilbert

University of Texas at Austin - McCombs School of Business

Guoming Lai

University of Texas at Austin - Red McCombs School of Business

Date Written: September 23, 2018

Abstract

We consider on-demand healthcare platforms that allow patients to seek care online from distributed doctors. Healthcare costs have been steadily increasing, while patient experience continues to sour with costly (many times unnecessary) commute and waiting. To alleviate the costs, various on-demand healthcare platforms have emerged but have been little investigated in academic research. We develop a strategic queueing model where the platform decides the commission rate upon which potential doctors make their participation, service quality and pricing decisions and potential patients make their service acquisition decisions independently. We find that in equilibrium a higher commission rate always lowers doctor participation as well as service quality, but it may increase the service price if it significantly softens the competition. Moreover, as patient intensity increases, the service quality improves, accompanied largely with a higher price. We further investigate the effect of platform price control. We find that allowing the platform to control the service price in addition to the commission rate may result in more doctor participation, higher service quality and price, higher platform profit, and surprisingly even higher profit for the doctors. This generally occurs when the patient intensity is either low or high, the waiting cost is low, or the doctor heterogeneity is low. Our results are useful to understand the performance of on-demand healthcare platforms.

Suggested Citation

Liu, Yixuan and Wang, Xiaofang and Gilbert, Stephen and Lai, Guoming, Pricing, Quality and Competition at On-Demand Healthcare Service Platforms (September 23, 2018). Available at SSRN: https://ssrn.com/abstract=3253855 or http://dx.doi.org/10.2139/ssrn.3253855

Yixuan Liu

University of Texas at Austin, Red McCombs School of Business, Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States

Xiaofang Wang

Renmin University of China

59 Zhongguancun St
Haidian Qu
Beijing, Beijing 100872
China

Stephen Gilbert

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

Guoming Lai (Contact Author)

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

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