A Theory of Multihoming in Rideshare Competition

We examine competition amongst ridesharing platforms where firms compete by choosing both the price of rides and the extent of idleness. Idleness means drivers who are compensated without picking up passengers, instead acting to reduce passenger wait time. We show that when consumers are the only agents who multihome, idleness falls compared with when they face a monopoly ridesharing platform. When drivers and consumers multihome, idleness further falls to zero as it involves costs for each platform that are appropriated, in part, by their rival. Interestingly, socially superior outcomes may involve monopoly or competition under various multihoming regimes, depending on the density of the city, and the relative costs of idleness versus consumer disutility of waiting.