Research on compatibility strategy of ride-hailing platforms
by Ke Lu; Jing Zhou; Xiaowei Lin
European J. of International Management (EJIM), Vol. 13, No. 6, 2019

Abstract: In this paper, the compatibility strategy of ride-hailing platforms is analysed based on two-sided market theory. The basic model is constructed by considering the utility function of travellers and drivers. Then two situations of compatibility model are extended based on the basic model. In situation 1, the cross-platform cost is afforded by travellers. And in situation 2, the cross-platform cost is afforded by platforms. The equilibrium price and profit in both situations of compatibility model are analysed. Moreover, the factors of average waiting time and driver's commission rate are also introduced in order to reflect the characteristic of the ride-hailing service. Finally, the results from the basic model and compatibility model with two situations are analysed and compared. The main results indicate that the equilibrium price charged to travellers in situation 1 is always higher than that in situation 2, while the price charged to drivers in situation 1 is always lower than that in situation 2. Moreover, the ride-hailing platforms that afford the cross-platform cost can earn more profit. And the relationship between driver's commission rate, average cost per transaction and equilibrium price, total profit is also depending on the probability that travellers choose to make cross-platform transactions.

Online publication date: Tue, 08-Oct-2019

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