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Chinese Journal of Management Science ›› 2023, Vol. 31 ›› Issue (8): 111-121.doi: 10.16381/j.cnki.issn1003-207x.2020.1798

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Pricing Strategy Selection for On-demand Freight Service Platforms

Yong-wu ZHOU1,Xin-xin GUAN1,Bin CAO2,Xiao-gang LIN3(),Qiang LIN3   

  1. 1.School of Business Administration, South China University of Technology, Guangzhou 510641, China
    2.School of Business Administration, Jinan University, Guangzhou 510632, China
    3.School of Management, Guangdong University of Technology, Guangzhou 510520, China
  • Received:2020-09-17 Revised:2021-01-11 Online:2023-08-15 Published:2023-08-24
  • Contact: Xiao-gang LIN E-mail:xglin1010@hotmail.com

Abstract:

In recent years, we have witnessed the tremendous growth of sharing economy. One of the most compelling examples of this economy is the on-demand freight services, such as HuoLaLa, GoGoVan, and Uber Freight, etc. Because providers can decide whether to join these platforms and offer services for customers, an appropriate pricing strategy is required to assure the number of providers to satisfy demands and thereby maximize profits. In real life, there are two common-seen pricing strategies adopted by on-demand freight service platforms: membership-based policy and transaction-based policy. This study aims to examine which pricing strategy should these platforms employ. To this end, an on-demand freight service platform whose objective is to maximize profit by determining customer prices is considered and two stylized models in the presence of network effect are built, which is the typical characteristic of on-demand freight service economy. the optimal prices, profits, consumer surplus, and labor welfare of the membership-based policy and transaction-based policy are characterized and compared. The main results suggest that (i) the optimal price of the membership-based policy is lower than that of the transaction-based policy. However, the optimal profit of the membership-based policy is higher than that of the transaction-based policy; (ii) compared with the transaction-based policy, customers become better-off but providers become worse-off if the platform adopts the membership-based policy. The results offer valuable implications for relevant practices. Specifically, through our analysis, on-demand freight service platforms should adopt different pricing strategies under different stages of development. For those platforms at the initial stage, they should adopt the transaction-based policy to improve labor welfare and thereby appeal to more providers to join the platforms, although the membership-based policy can help earn more profits. For those platforms at the developed stage, however, they should adopt the membership-based policy. This not only can help improve consumer surplus and thereby attract more customers but also increase the profits.

Key words: sharing economy, on-demand freight service platforms, pricing strategy, network effect

CLC Number: