An analysis of pricing strategy for bike-sharing services: The role of the inconvenience cost

Abstract

In actual bike-sharing services, an operator can adopt any of three pricing strategies, namely, pay-per-use (Strategy P), flat-fee (Strategy F) and a hybrid of pay-per-use and flat-fee (Strategy H). When the operator launches the mode of picking up and returning bikes at designated shared bike parking points, users often perceive the inconvenience cost because of having to go to the designated parking points to pick up and return shared bikes. This paper investigates operators’ pricing strategies in monopoly and duopoly markets and analyzes the effects of the inconvenience cost on different pricing strategies. We find that in the monopoly market, it is advantageous for the operator to choose Strategy H if the inconvenience cost is relatively small; otherwise, it is advantageous to choose Strategy F. In the duopoly market, the operator can choose Strategy P. In particular, when the two operators bring the same inconvenience cost to users, there exist two pricing strategy combinations in equilibrium, namely, P/F and F/P. When the two operators bring different inconvenience costs to users, there exist five pricing strategy combinations in equilibrium, namely, P/F, F/P, H/F, F/H and F/F.