Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, July 14, 2017

The Impact of Multi-Homing in a Ride-Hailing Market

Qihong Liu, University of Oklahoma - Department of Economics, Oksana Loginova, University of Missouri, and X. Henry Wang, University of Missouri-Columbia analyze The Impact of Multi-Homing in a Ride-Hailing Market.

ABSTRACT: Platforms such as Uber, Lyft and Airbnb serve two-sided markets with drivers (property  owners) on one side and riders (renters) on the other side. Some agents multi-home. In the case of ride-hailing, a driver may drive for both Uber and Lyft, and a rider may use both apps and request a ride from the company that has a driver close by. In this paper, we are interested in welfare implications of multi-homing in such a market. Our model abstracts away from entry/exit by drivers and riders as well as pricing by platforms. Both drivers’ and riders’ surpluses are determined by the average time between a request and the actual pickup. The benchmark setting is a monopoly platform and the direct comparison is a single-homing duopoly. The former is more efficient since it has a thicker market. Next, we consider two multi-homing settings, multi-homing on the rider side and multi-homing on the driver side respectively. Relative to single-homing duopoly, we find that multi-homing on either side improves the overall welfare. However, multi-homing drivers potentially benefit themselves at the cost of single-homing drivers. In contrast, multi-homing riders benefit themselves as well as single-homing riders, representing a more equitable distribution of gains from multi-homing.

http://lawprofessors.typepad.com/antitrustprof_blog/2017/07/the-impact-of-multi-homing-in-a-ride-hailing-market.html

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