List Now or Later? An Equilibrium Analysis of Advance-Booking Platforms

51 Pages Posted: 27 Jul 2022 Last revised: 23 Apr 2024

Date Written: July 21, 2022

Abstract

Many sharing platforms facilitate on-demand service to their guests and allow guests to reserve assets ahead of service. On such platforms, ''hosts''- asset owners who rent their assets- inform the platform beforehand about their asset's availability by creating a ''listing." By doing so, the hosts commit to the assets' availability at a future time. In practice, many platforms use dynamic pricing, and the hosts earn a share of the revenue generated by their assets. Hence, hosts' decision to list early or later is not trivial. We find empirical evidence of hosts' strategic decisions regarding whether to list early or later in the real-world data of one of the largest car-sharing platforms. On such asset-sharing platforms, hosts must decide (a) whether to create a listing for their assets on the platform and (b) whether to list early or later. We use the two-period game-theoretic framework to model a peer-to-peer sharing platform where guests differ in their times for reserving an asset and independent hosts who provide the assets decide if and when to list them. In this paper, we first theoretically characterize the region where no hosts list their assets early and, consequently, the platform cannot serve advance-booking customers. The result highlights the limitations of commission-rate contracts on asset-sharing platforms. Next, we find the optimal contract for such sharing platforms. Finally, we find that when hosts' opportunity cost of listing is below a threshold, delinking hosts' earnings from the platform's revenue through a constant-wage contract is optimal.

Keywords: dynamic-pricing, advance-booking platforms, sequential game, decentralized supply

Suggested Citation

Sharma, Neha and Singha, Sumanta and Sohoni, Milind G. and Bassamboo, Achal, List Now or Later? An Equilibrium Analysis of Advance-Booking Platforms (July 21, 2022). Available at SSRN: https://ssrn.com/abstract=4169285 or http://dx.doi.org/10.2139/ssrn.4169285

Neha Sharma (Contact Author)

Northwestern University - Department of Operations ( email )

2211 Campus Dr
Kellogg School of Management
Evanston, IL 60208
United States

Sumanta Singha

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

Milind G. Sohoni

Indian School of Business ( email )

Hyderabad, Gachibowli 500 032
India

HOME PAGE: http://www.isb.edu/faculty/milind_sohoni

Achal Bassamboo

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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