Antitrust & Competition Policy Blog

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

Tuesday, December 4, 2018

Competition Between Two-Sided Platforms Under Demand and Supply Congestion Effects

Fernando Bernstein, Duke University, Gregory DeCroix, University of Wisconsin - Madison - School of Business, and N. Bora Keskin, Duke University - Fuqua School of Business analyze Competition Between Two-Sided Platforms Under Demand and Supply Congestion Effects.

ABSTRACT: Problem definition: This paper explores the impact of competition between platforms in the sharing economy. Examples include the cases of Uber and Lyft in the context of ride-sharing platforms. In particular, we consider competition between two platforms that offer a common service (e.g., rides) through a set of independent service providers (e.g., drivers) to a market of customers. Each platform sets a price that is charged to customers for obtaining service provided by a driver. A portion of that price is paid to the driver that delivers the service. Both customers’ and drivers’ utilities are sensitive to the payment terms set by the platform and are also sensitive to congestion in the system (given by the relative number of customers and drivers in the market). We consider two possible settings. The first one, termed “single-homing,” assumes that drivers work through a single platform. In the second setting, termed “multi-homing” (or “multi-apping” as it is known in practice), drivers deliver service through both platforms.

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