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The optimal pricing strategy for two-sided platform delivery in the sharing economy

Listed author(s):
  • Kung, Ling-Chieh
  • Zhong, Guan-Yu
Registered author(s):

    Nowadays many platforms emerge to provide delivery services by having independent shoppers to deliver groceries from independent retailers to consumers. To understand how to price this service, we formulate a two-sided platform’s profit maximization problem by considering network externality. We focus on three pricing strategies, membership-based pricing, transaction-based pricing, and cross subsidization. When time discounting is absent and consumers’ order frequency is price-insensitive, it is shown that these three strategies are equivalent. As membership-based pricing collects money the earliest and maximize price-sensitive order frequency, our analysis explains some platforms’ promotion of it.

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    File URL: http://www.sciencedirect.com/science/article/pii/S136655451630583X
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    Article provided by Elsevier in its journal Transportation Research Part E: Logistics and Transportation Review.

    Volume (Year): 101 (2017)
    Issue (Month): C ()
    Pages: 1-12

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    Handle: RePEc:eee:transe:v:101:y:2017:i:c:p:1-12
    DOI: 10.1016/j.tre.2017.02.003
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description

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    1. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, 09.
    2. Thomas W. Bates & Kathleen M. Kahle & René M. Stulz, 2009. "Why Do U.S. Firms Hold So Much More Cash than They Used To?," Journal of Finance, American Finance Association, vol. 64(5), pages 1985-2021, October.
    3. Fudenberg, Drew & Tirole, Jean, 2000. "Pricing a Network Good to Deter Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 373-390, December.
    4. Wang, Xiaolei & He, Fang & Yang, Hai & Oliver Gao, H., 2016. "Pricing strategies for a taxi-hailing platform," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 212-231.
    5. Jing, Bing, 2007. "Network externalities and market segmentation in a monopoly," Economics Letters, Elsevier, vol. 95(1), pages 7-13, April.
    6. Zhang, Anming & Zhang, Yimin, 1997. "Concession revenue and optimal airport pricing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(4), pages 287-296, December.
    7. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
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