Cooperate with aggregation platform or not? Optimal decision for the on-demand ride service platform

Abstract

In recent years, the emergence of aggregation mode has enabled consumers to access multiple ride service platforms through a single app, including small and medium-sized platforms. This relatively inclusive and equitable traffic distribution model not only presents new opportunities for these platforms but also heightens competitiveness among them. In this context, this paper establishes models to analyze the optimal cooperation strategies of ride service platforms and the impact of various factors on these strategies under different market conditions. The findings suggest that it is optimal for ride service platforms to cooperate with the aggregation platform. Sensitivity analysis indicates that the optimal pricing and profit of a ride service platform increase with its additional network externality. In a highly competitive market, the optimal pricing and profit will decrease with the rival platform's additional network externality and increase with the congestion level of both sides. Furthermore, the analysis reveals that while the aggregation platform has the right to choose cooperation, it will only collaborate with one ride service platform if the profit distribution from this cooperation exceeds that from partnering with both platforms. For the platform without cooperation, the outcome is not always worse than before, and the conditions for this scenario are provided. Finally, based on these conclusions, corresponding managerial implications are proposed for each stakeholder.