Pricing strategy and platform competition with partial multi-homing agents: When the aggregation platform exists in ride-sharing market

• Published in: Transportation research. Part E, Logistics and transportation review Vol. 184; p. 103483
• Main Authors: Liu, Bin, Zhao, Xiuyan, Gu, Qiongqiaong
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.04.2024
• Subjects: Aggregation platform (AP); Multi-homing; Pricing decision; Ride-sharing platform (RSP); Single-homing; Aggregation platform (AP); Pricing decision; Multi-homing; Ride-sharing platform (RSP); Single-homing
• ISSN: 1366-5545; 1878-5794
• DOI: 10.1016/j.tre.2024.103483

•Discusses the platform's pricing strategy and mode selection by the Hotelling model.•Considering the factors such as network effect and levels of user involvement.•Multi-homing on agents could make RSP subsidize agents, and AP charges higher fees.•RSP with access to aggregation harms its service providers in specific conditions.•Multi-homing on agents benefits RSP and social welfare with RSP accessing specific conditions. As the platform of Ride-Sharing Platforms (RSPs), the Aggregation Platform (AP) integrates resources from RSPs which provide an on-demand car-sharing service by matching suitable passengers and drivers. From the view of the platform, consumer surpluses and social welfare, this paper discusses the platform's pricing strategy and mode selection (single-homing or multi-homing on agents) by the Hotelling model considering network effect and levels of user involvement. Research findings include whether RSP accesses the aggregation, the single-homing or multi-homing on the agents does not affect the agent fees both platforms charged. The multi-homing on agents makes the platform accessible to agents if the RSPs are not integrated into the aggregation platform. The multi-homing on agents makes the RSP subsidize agents, and AP charges higher fees to agents when RSP accesses the aggregation. Furthermore, under single-homing or multi-homing on the agents, the RSP with access to the aggregation will permanently harm its service providers but benefit AP and social welfare in specific conditions. Additionally, the multi-homing on agents will harm the aggregation platform service providers but benefit RSP and social welfare in specific conditions when the RSP accesses.