Abstract

Owing to the advances in technology, new types of service delivery spring up in the sharing economy. Owning no warehouse and hiring no full-time shippers, Instacart runs its grocery delivery service by delivering grocery from independent retailers by independent contractors to its consumers. This “platform delivery” model is formulated as a game-theoretic model and investigated. We discuss the profitability of three common pricing strategies, membership-based pricing, transaction-based pricing, and cross subsidization. It is shown that these three strategies generate the same amount of profit for the perfectly patient platform. However, in general the membership-based strategy would be better than the others.

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