Pricing strategy for logistics service platforms with competition and user distance preference

Abstract

In practice, the demanders (customers) and providers (sellers) of logistics service platforms not only care about prices but also are sensitive to the spatial distance between each other (because longer distance would lead to longer service waiting time). We study the impacts of spatial distance preference on two competing logistics platforms' pricing strategies. Two groups of agents (demanders and providers) are required to pay the logistics service platform a fixed (registration) fees to gain access. We analyze two commonly seen scenarios in practice: (i) the single-homing model-both demanders and providers can only join one of the platforms; (ii) the competitive bottleneck model-demanders (providers) can join only one of the platforms while providers (demanders) are allowed to join both platforms. We find that under the single-homing setting, an increase in demanders' (providers') distance preference would lead to higher but lower (lower but higher) prices charged to demanders and providers, respectively, and higher profits of both platforms. Under the competitive bottleneck model, however, the price charged to demanders (providers) might decrease (increase) in demanders' (providers') distance preference. Finally, compared to the case in which both sides single homing, we find that allowing providers or demanders to join both platforms would decrease the profits of both platforms if users' distance preference is sufficiently low or high.

Dynamic competition and market structure for platform‐based products: roles of product quality and indirect network effect

“…Hou et al. (2021) study the impacts of spatial distance preference on pricing strategies for two competing logistics platforms; they show that multi‐homing decreases the platforms’ profits when users’ distance preference is sufficiently low or high. By modeling a simultaneous game with a Hoteling framework, He and Ma (2023) study the pricing and service quality decisions for duopoly crowdsourced delivery platforms.…”

“…In a competing setting where two firms offer horizontally differentiated platforms, Carrillo and Tan (2021) characterize the platforms' pricing structure and the platform's incentives to subsidize the independent complementor. Hou et al (2021) study the impacts of spatial distance preference on pricing strategies for two competing logistics platforms; they show that multi-homing decreases the platforms' profits when users' distance preference is sufficiently low or high. By modeling a simultaneous game with a Hoteling framework, He and Ma (2023) study the pricing and service quality decisions for duopoly crowdsourced delivery platforms.…”

Service quality and price competition in crowdsourced delivery markets

“…We consider two competitive CDPs with heterogeneous service quality and use the Hotelling framework as the primary setting (Bakos and Halaburda, 2020; Hou et al., 2021). The two competing CDPs are labeled as $$i,j \in \{ {1,2} \}$$ with $$i \ne j$$.…”

“…Following the rapid development of the network economy, traditional express delivery companies may face a crisis of survival because of their high investment costs and scattered delivery demand. However, the emergence of crowdsourcing addresses this dilemma (Hou et al, 2021). The crowdsourced delivery model is aimed at the last-mile delivery problem caused by the rapid development of the "lazy economy."…”

“…Following the rapid development of the network economy, traditional express delivery companies may face a crisis of survival because of their high investment costs and scattered delivery demand. However, the emergence of crowdsourcing addresses this dilemma (Hou et al., 2021). The crowdsourced delivery model is aimed at the last‐mile delivery problem caused by the rapid development of the “lazy economy.” The model integrates socially idle transportation resources into self‐scheduled couriers to provide last‐mile delivery services on the demand side through crowdsourced delivery platforms (CDPs).…”