Pricing Decisions for an On-Demand Crowdsourced Delivery Platform With Differentiated Service Levels

Abstract

Motivated by the diverse services provided by various on-demand service platforms to satisfy customers’ different needs, we investigate the pricing of an on-demand crowdsourced delivery platform (CDP) with differentiated service levels. Using a multinomial logit model, we propose a two-sided market framework for investigating the pricing decisions of a CDP with two differentiated service levels under a general variable commission scheme and a fixed-rate commission scheme. The results show that 1) the two-sided pricing mechanism (price and wage decisions) allows the supply to match the demand for different service levels, except when the CDP adopts a fixed-rate commission scheme; and 2) depending on the magnitude of the fixed commission rate, adopting a fixed-rate commission scheme has different impacts on the equilibrium outcomes. We also extend our model by including the commission scheme and multiple service levels. The results show that 1) the CDP can achieve a higher optimal profit under the courier classification scheme than under a benchmark variable commission scheme, and 2) offering senders and couriers diversified service levels benefits the CDP. This article provides CDP practitioners with a quantitative tool for pricing for service-level menus.