Growing Platforms by Adding Complementors Without a Contract

Multisided platforms often pursue growth strategies of expanding participants on one side (e.g., suppliers) and leveraging the cross-side network effect to attract participants on other sides (e.g., consumers). Whereas formal contractual agreements have traditionally been the norm for onboarding suppliers, an emerging trend involves platforms enabling consumers to interact with noncontracted suppliers via third-party enablers with both sharing profits from providing complementary services. This study examines this strategy of increasing market thickness in the context of food delivery platforms, focusing on the platforms’ inclusion of restaurants as “nonpartnered” restaurants. Nonpartnered restaurants do not pay commission fees for being listed on the platforms and do not control their menu or item prices. The platforms collect and transfer consumer orders to the third-party deliverers who place the order, pick it up, and deliver the food to consumers. The strategy has drawn regulatory scrutiny regarding its potential harm to nonpartnered restaurants and consumers. This research empirically investigates the impact of this noncontracted partnership on restaurants, leveraging two natural experiments: (1) a number of nonpartnered restaurants were listed on the platform, and (2) the restaurants were later delisted because of a governmental regulation. Our findings show that being added as a nonpartnered restaurant increases these restaurants’ revenue from takeout orders by about $1,410 per month. Adding nonpartnered restaurants also has a positive spillover effect on the revenue of partnered restaurants already on the platform. Finally, the delisting of nonpartnered restaurants leads to a drop in their takeout orders as well as a negative spillover on the revenue of partnered restaurants. In essence, a nonpartnered contract benefits most restaurants, especially independent restaurants. These insights can inform the design of platform and regulatory policies related to noncontracted growth strategies.