Two-sided pricing strategies for a parking sharing platform : reselling or commissioning?

Abstract

A parking sharing platform plays the role of a matchmaker between parking ‘slot owners/sharers’ and ‘slot renters’ who demand parking. The platform can act as either a reseller or a commissioner, and can have different economic objectives when setting prices for owners and renters. This paper is the first to address a platform operator's pricing strategy in a two-sided parking sharing market under different business formats (reselling and commissioning) and different economic objectives (profit-maximization and social welfare-maximization). The number of parking slots rented out is assumed to be an increasing function of the number of suppliers (owners) who offer a slot for rent, and the number of demanders (parkers) who request a slot. We derive the supply–demand matching equilibrium and the platform's two-sided pricing strategies for the alternative business formats and objectives. We also analytically and numerically examine how the buying and selling prices, and numbers of participating owners, renters, and transactions vary with parameter values in each business format. We find that a welfare-maximizing platform earns a positive profit if the matching function has decreasing returns to scale, and incurs a deficit if the matching function has increasing returns to scale. If the cost of inconvenience to slot owners from renting a slot equals their cost of disappointment from failing to rent it out, then the reselling and commissioning formats can replicate each other (i.e, they can yield identical platform profit and social welfare). If the cost of inconvenience is greater then the commissioning format is superior, whereas if the disappointment is greater the reselling format is preferred.