Optimal Business Model for Information Technology-Enabled Ride-Hailing Platform: Pooling, Premier or Hybrid?

41 Pages Posted: 14 Feb 2020

See all articles by Xin Wei

Xin Wei

Tianjin University - College of Management and Economics

Guofang Nan

Tianjin University; Tianjin University - College of Management and Economics

Runliang Dou

Tianjin University - College of Management and Economics

Minqiang Li

Tianjin University - College of Management and Economics

Date Written: January 21, 2020

Abstract

Purpose - Pooling, premier, and hybrid are three business models employed by information technology-enabled (IT-enabled) ride-hailing platforms, which based on two corresponding technical function modules (pooling module and premier module) of the platform. The goal of this study is to explore which technical function an IT-enabled ride-hailing platform should adopt in a monopoly market.

Design/methodology/approach - This paper considers an IT-enabled ride-hailing platform offering differentiated services with different intrinsic values in a monopoly market. The authors establish an analytical framework to examine three models for addressing the platform’s optimal business decision.

Findings - The results reveal that both the time-sensitive cost of heterogeneous passengers and the operating cost of the platform’s self-operating vehicles play critical roles in the platform’s choice of optimal technical function module. In addition, this paper characterizes the conditions under which the pooling service model (using pooling module) and the premier service model (using premier module) can achieve Pareto improvement for the platform and passengers. Furthermore, the authors find that network externalities have a non-monotonic effect on the driver surplus when the platform only develop premier module.

Originality/value - This study significantly contributes to the related literature by considering the impacts of the passengers’ heterogeneity and the platform’s openness on the optimal strategy choice of an IT-enabled ride-hailing platform. It also provides function module suggestions to the platform, and guides the platform to improve and develop technical development.

Keywords: IT-enabled ride-hailing platform, business model, technical function module, time-sensitive cost, pricing strategy, sharing economy

Suggested Citation

Wei, Xin and Nan, Guofang and Nan, Guofang and Dou, Runliang and Li, Minqiang, Optimal Business Model for Information Technology-Enabled Ride-Hailing Platform: Pooling, Premier or Hybrid? (January 21, 2020). Available at SSRN: https://ssrn.com/abstract=3522998 or http://dx.doi.org/10.2139/ssrn.3522998

Xin Wei (Contact Author)

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Guofang Nan

Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Runliang Dou

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Minqiang Li

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

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