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Chinese Journal of Management Science ›› 2021, Vol. 29 ›› Issue (1): 138-148.doi: 10.16381/j.cnki.issn1003-207x.2019.1965

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Dynamic Pricing for Ride-Hailing Platforms with Different Competition Conditions under Stochastic Demand

SUN Zhong-miao, XU Qi   

  1. Glorious Sun School of Business and Management, Donghua University, Shanghai 200051, China
  • Received:2019-11-29 Revised:2020-03-04 Published:2021-02-07

Abstract: In recent years, ride-hailing platforms based on the sharing economy have been rapidly popularized and have subverted the traditional taxi market. These platforms often face the mismatch between supply and demand caused by market demand fluctuations and the competition between platforms. In view of the optimal pricing problem with the competitions of demand and supply among ride-hailing platforms under the ride demand fluctuation. Using optimal control theory, the dynamic pricing models considering platform competition with different conditions in which the object is to maximize platform expected profit is constructed. The optimal dynamic competitive price solution is deducted using Hamiltonian function, and the demand rate and supply rate is presented. Through the model analysis and numerical simulation, the optimal dynamic competitive pricing strategy based on time change under different market situations is studied. The influences of supply market competition, demand market competition and fixed commission contract on platform pricing and profit are analyzed. Results show that the optimal dynamic competitive price of the platform changes dynamically with the fluctuation of market demand, and the optimal price can effectively regulate the supply capacity, promote the matching of supply and demand, and optimize the expected revenue of the platform. In addition, the more intense the competition in the ride demand market, the lower the optimal price of the platform, while the more intense the competition in the supply market, the higher the optimal price. The intensified competition between platforms will reduce the platform's expected revenue, and the expected revenue will first increase and then decrease with the increase in the fixed commission rate of return. This study can provide some management insights for ride-hailing platforms' pricing decisions, supply-demand match and competitive strategy.

Key words: ride-hailing platform, dynamic pricing, platform competition, fixed rate of return on commission, optimal control method

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