Product Line Design and Dispatch Strategy on Home Service Platforms

In recent years, home service platforms have experienced substantial growth. These platforms typically employ commission-based contracts to incentivize suppliers to offer a variety of services to consumers. To maximize profits, platforms must strategically optimize their dispatch strategies, contract design, and product quality decisions. We develop a model to analyze these decisions in an environment in which suppliers differ in service efficiency and consumers vary in their willingness to pay for quality. Consumers with higher (lower) willingness to pay for quality are classified into high (low) segments. When the low segment becomes particularly influential—because of its large population share and relatively high willingness to pay—the platform may find it optimal to induce high-efficiency suppliers to provide low-quality products. This tendency is further amplified when the matching probability for low-quality products is high. Conversely, when the heterogeneity between consumer segments is sufficiently small, the platform prefers to induce high-efficiency suppliers to provide high-quality products, resulting in upward quality distortion for the high segment. In this case, the quality gap between the two offerings increases with the low segment’s willingness to pay for quality.