Pricing on Two-Sided Market of Ride-Sharing Platform

Ride-sharing platforms match riders and drivers by setting two prices. One price is what riders pay, the other is what drivers receive. There is no bargaining process between riders and drivers and there is also no direct transaction between these two sides. Thus, we may think of this market as two-sided. We model equilibrium in this two-sided market by endogenizing the number of riders and drivers and the two prices. In this paper, we study how (rider’s) price affects the equilibrium outcome. From Lyft’s market-level experiment on changing rider’s price, we found higher rider’s price decreases both rider’s demand and waiting time, and it also decreases driver’s supply and utilization in the equilibrium. We also compare the demand elasticities from market-level price treatment and individual-level price treatment, and we found that the former is smaller than the later in absolute value terms. This helps us do simple welfare analysis for rider’s price change. From Lyft's driver side price treatments, we detect scaling problem that higher driver price might harm drivers by increased competition between drivers.