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Chinese Journal of Management Science ›› 2020, Vol. 28 ›› Issue (12): 130-139.doi: 10.16381/j.cnki.issn1003-207x.2020.12.013

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Pricing Strategy and Business Model Determination of Service Platform under Demand and Output Uncertainty

ZHANG Xuan1, CHEN Hong-min1, ZHAO Dan2   

  1. 1. Antai College of Economics & Management, Shanghai Jiao Tong University, Shanghai 200052, China;
    2. School of Management, Henan University of Science & Technology, Luoyang 471000, China
  • Received:2019-08-31 Revised:2020-03-04 Online:2020-12-20 Published:2021-01-11

Abstract: As the development of information and remote technologies, more and more offline service could be accessed. Someservice providers begun using online platforms to enable themselves to directly connect with customers, but sometend to be hired by platform. For the service provider, the platform like an online labor market now. To some service providers,they are not only using the platform but also being hired by the platform. Then, when the platform wants to drive the service providers to provide the desired outcome after their contract is signed, an ex-post problem arises. Meanwhile, the uncertainty of consumer side would also affect.
Considering the cases that uncertainty on two sides, the service pricing, optimal incentive scheme, business model choosing and conduction of efficiency of platforms are analyzed. Unlike the usual platform that charges both sides a fixed fee, the online-hiring platform shares revenue with one sideaccording to service provider's performance. From equilibriums, it is shown that:(1) When the uncertainty of consumer side is high, pricing of consumer side is low. When the uncertainty of service provider side is high, pricing of consumer side is high. When the self-externality of consumer side is large, the effects of uncertainty of consumer side on service pricing is weakened. When the cross-externality of consumer side is large, the effects of uncertainty of consumer side on service pricing is strengthened. (2) When the uncertainty of consumer side or the uncertainty of service provider side is high, online service firm tend take more risk. (3) When the uncertainty of service provider side exists, the price of consumer side and the salary for service provider are both higher than ever before. And the variance on service provider side is larger than that of consumer side. The platform will take part of the efficiency loss and the amount of this efficiency loss it takes is positive with the cross-externality of consumer side.
First, to see the uncertainty's impact on pricing in reality. Take online knowledge sharing industry for example. According to the reports of "China online knowledge sharing industry and consumer behavior investigation 2020", the main three platforms is Ximalaya FM, Zhihu and Dedao. And they have different business models, including OHP model where platform hire content provider, and Platform Model where platform is just a place for exchange. Although being the same business model, Ximalaya FM and Zhihu Live have different pricing strategy. With more restrictions and low uncertainty on consumer side, Zhihu Live's pricing on consumer side is higher than Ximalaya FM's pricing. Second, to see the uncertainty's impact on business model, a comparison between service industries is given. Household service with low uncertainty level have more cases signing contract directly with customers than that of knowledge sharing or online literature platform with high uncertainty level.
Theoretically, by providing a new framework combining the two-sided market and principal-agent theory, the optimal pricing is given under the case of two-side uncertainty, and a conduction mechanism of efficiency loss is presented.In reality, it not only helps platform making pricing decision,but also explains why some kind of online service could not exist due to the heavy moral hazard problem. And, with more uncertainty on both sides, the platform should assume more risk. In more extreme situations, the platform should choose the B2C mode and assume all risks.

Key words: demand uncertainty, output uncertainty, service platform, platform pricing, conduction of efficiency loss

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