Can Two Competing On-Demand Service Platforms Be Profitable?
38 Pages Posted: 22 Aug 2022
Can two competing on-demand service platforms be profitable in equilibrium? The question is well-studied for firms competing purely on price in a single-sided market, but it is not wellunderstood for competing service platforms that use price to influence passenger demand and wage to influence driver participation in a “two-sided” market. To fill this research gap, we analyze the equilibrium structure by solving different variants of a 2-stage non-cooperative game in which both platforms use lower prices and waiting time to compete for more customers and higher wages and utilization to entice more providers to participate.
Keywords: On-Demand Economy, Non-cooperative Game, Increasing Return, network externality, Two-sided markets, Platform competition
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