Service quality and price competition in crowdsourced delivery markets

Abstract

On‐demand crowdsourced delivery platforms (CDPs) must consider service quality and price when making their decisions. In addition, CDPs may value service quality and price differently during different stages of development. Therefore, we focus on exploring the service quality and pricing strategies of duopoly CDPs under two different competition scenarios: pure price competition and joint price and service quality competition. A Hotelling framework and simultaneous game model are employed to match the two competition scenarios in real business. First, we derive the optimal solutions for the single‐homing scenario. The results show that quality differences create differentiated equilibrium prices under pure price competition. In particular, large quality differences benefit superior CDPs. Under joint price and service quality competition, CDPs set the same service quality and price, and gain the same number of agents and the same profits. Second, we extend the basic model by considering cost asymmetry, multi‐homing behavior, and different charging schemes for couriers. Compared with the basic model under joint price and service quality competition, the CDPs’ service quality and pricing decisions differ when they have different cost control and charging schemes but are identical in the multi‐homing scenario.