On-Demand Service Platforms

Terry A. Taylor ()
Additional contact information
Terry A. Taylor: Haas School of Business, University of California, Berkeley, California 94720

Manufacturing & Service Operations Management, 2018, vol. 20, issue 4, 704-720

Abstract: An on-demand service platform connects waiting-time-sensitive customers with independent service providers (agents). This paper examines how two defining features of an on-demand service platform—delay sensitivity and agent independence—impact the platform’s optimal per-service price and wage. Delay sensitivity reduces expected utility for customers and agents, which suggests that the platform should respond by decreasing the price (to encourage participation of customers) and increasing the wage (to encourage participation of agents). These intuitive price and wage prescriptions are valid in a benchmark setting without uncertainty in the customers’ valuation or the agents’ opportunity costs. However, uncertainty in either dimension can reverse the prescriptions: Delay sensitivity increases the optimal price when customer valuation uncertainty is moderate. Delay sensitivity decreases the optimal wage when agent opportunity cost uncertainty is high and expected opportunity cost is moderate. Under agent opportunity cost uncertainty, agent independence decreases the price. Under customer valuation uncertainty, agent independence increases the price if and only if valuation uncertainty is sufficiently high.

Keywords: service operations; incentives and contracting; game theory; queueing theory (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (126)

Downloads: (external link)
https://doi.org/10.1287/msom.2017.0678 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormsom:v:20:y:2018:i:4:p:704-720

Access Statistics for this article

More articles in Manufacturing & Service Operations Management from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().