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Optimal revenue sharing in platform markets: a Stackelberg model

Author

Listed:
  • Minhyuk Sur

    (Seoul National University)

  • Deok-Joo Lee

    (Seoul National University)

  • Kyung-Taek Kim

    (Korea Institute of Energy Research)

Abstract

Because of its ability to generate many revenue streams, the platform business has received much attention in recent years, and the revenue sharing problem between platform providers and service providers is a key issue. We adopted the Stackelberg model to analyze the optimal revenue sharing rates between these two parties when the platform provider acts as a leader, while the service providers are followers. We derive the closed form of optimal revenue sharing rates as the equilibrium of the Stackelberg model. Numerical experiments with graphical illustrations are presented to demonstrate the optimality of revenue sharing rates whereby the two parties maximize their own profits. In addition, on the basis of the results of optimal revenue sharing rates, the present study performs sensitivity analyses with regard to various exogenous variables that could affect the optimal revenue sharing rates. Our findings indicate that potential demand was the most significant factor in affecting optimal revenue sharing. Therefore, decision makers should carefully monitor their platform business markets to maximize the profits of all the parties involved.

Suggested Citation

  • Minhyuk Sur & Deok-Joo Lee & Kyung-Taek Kim, 2019. "Optimal revenue sharing in platform markets: a Stackelberg model," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(4), pages 317-331, August.
    • Handle: RePEc:pal:jorapm:v:18:y:2019:i:4:d:10.1057_s41272-018-00180-4
    DOI: 10.1057/s41272-018-00180-4
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    References listed on IDEAS

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    Cited by:

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    2. Sangita Poddar & Tanmoyee Banerjee(Chatterjee) & Swapnendu Banerjee, 2023. "Taxation on duopoly e-commerce platforms and their search environments," SN Business & Economics, Springer, vol. 3(8), pages 1-20, August.

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