Bike-sharing duopoly competition under government regulation

Abstract

As an environmentally friendly and convenient transport mode, bike-sharing has been fast developed in major cities around the world. More bike-sharing firms have been formed and intensified market competition. The government has stipulated regulations to intervene in bike-sharing firm operations and to maintain orderly competition. This paper establishes an integrated economic model to examine duopoly bike-sharing firm competition in both prices and the number of deployed bikes. Specifically, more deployed bikes in the urban area reduce the time cost for the users to find an available bike (i.e., the search cost), but they can also impose a negative social externality on the urban management. Two government policies to control the number of deployed bikes have been examined and benchmarked. One is the limit on the total number of the deployed bikes (i.e., the supply-side regulation), and the other is the restriction to allow the users to only register or use certain firms’ services (i.e., the demand-side regulation of single-homing). Our model is also further calibrated by using the bike-sharing market data of Beijing for policy implications. It is found that, when the negative social externality of bike deployment is sufficiently small, the government should allow users’ multi-homing (i.e., registration on both firms’ platforms). However, when the negative social externality is high, the government should strictly control the number of bikes through both the supply-side and demand-side restrictions. Our analyses also suggest that it is never socially optimal to only adopt the demand-side restriction (i.e., forcing the single-homing). That is, the supply-side policy is more socially preferred to correct the negative social externality in most cases. When two bike-sharing firms offer quite heterogeneous services (i.e., low service substitutability), it is more socially optimal to only implement the supply-side policy.