Competition among parking platforms in the presence of indirect network effects

Abstract

A parking market including conventional public parking and novel shared parking is considered for matching parking demands and supplies. To investigate the competition between the public parking platform and the shared parking platform, a market equilibrium approach is proposed to investigate the interactions among the parking platforms, parking demanders, and parking owners, where indirect network effects referring mutual attractions between demands and supplies are incorporated. Targeted for profit maximization, we first formulate a basic model and derive the equilibrium results of parking platforms’ profits. Results show that indirect network effects positively affect the two parking platforms’ profits when the equivalent gains from alternative activities for parking owners are large, while negatively affect the profits otherwise in certain cases. Extensions regarding some considerations are then discussed, where Model D is proposed for dual decision of the shared parking platform and Model S is proposed for the social welfare maximization objective of the public parking platform. Comparisons of the three models in terms of equilibrium results are simulated consequently. Managerial implications to enhance the profits of the two parking platforms are further discussed.