The Role of On-Demand Delivery Platforms in Restaurants during Disruption: Evidence from the Coronavirus Pandemic

30 Pages Posted: 9 Sep 2020 Last revised: 2 May 2021

See all articles by Zhuoxin Li

Zhuoxin Li

Boston College - Carroll School of Management

Gang Wang

University of Delaware

Date Written: August 13, 2020

Abstract

The coronavirus (COVID-19) pandemic has interrupted many industries, with restaurants being one of the hardest-hit businesses. On-demand delivery platforms such as DoorDash, Grubhub, and Uber Eats have been a valuable option for consumers, but whether and to what extent these platforms benefit restaurants remain under-investigated. This paper studies the impact of delivery platforms on restaurant demand and staffing. Empirical analysis shows that restaurants that are on delivery platforms are less negatively affected by the pandemic: both consumer demand and restaurant staffing are higher than restaurants that are not on these platforms. However, such positive platform effects are substantially heterogeneous across different types of restaurants: the demand enhancement effect for fast-food chains is four times larger than that of independent restaurants. This disparity suggests that delivery platforms can widen the performance gap between national chains and independent restaurants, which may drive more independent restaurants to close. Further, we find that changes in customers’ price sensitivity may explain why fast-food chains disproportionally benefit from delivery platforms. While the use of delivery platforms increases during the pandemic, consumers on these platforms are more price sensitive as these platforms reduce geographic frictions and facilitate price comparisons. Therefore, consumers on the platforms are more likely to choose the relatively low-priced fast-food chains over independent restaurants. These findings deepen our understanding of the effects of delivery platforms on restaurants and have implications for restaurants and policy makers.

Keywords: On-demand platforms; on-demand services; two-sided platforms; food delivery; restaurants; demand; employment; COVID-19

Suggested Citation

Li, Zhuoxin and Wang, Gang, The Role of On-Demand Delivery Platforms in Restaurants during Disruption: Evidence from the Coronavirus Pandemic (August 13, 2020). Available at SSRN: https://ssrn.com/abstract=3665798 or http://dx.doi.org/10.2139/ssrn.3665798

Zhuoxin Li (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Ave
Chestnut Hill, MA Massachusetts 02467
United States

Gang Wang

University of Delaware ( email )

419 Purnell Hall
Newark, DE 19716
United States

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