Optimal Business Model for Information Technology-Enabled Ride-Hailing Platform: Pooling, Premier or Hybrid?

Abstract

Purpose - Pooling, premier, and hybrid are three business models employed by information technology-enabled (IT-enabled) ride-hailing platforms, which based on two corresponding technical function modules (pooling module and premier module) of the platform. The goal of this study is to explore which technical function an IT-enabled ride-hailing platform should adopt in a monopoly market. Design/methodology/approach - This paper considers an IT-enabled ride-hailing platform offering differentiated services with different intrinsic values in a monopoly market. The authors establish an analytical framework to examine three models for addressing the platform’s optimal business decision. Findings - The results reveal that both the time-sensitive cost of heterogeneous passengers and the operating cost of the platform’s self-operating vehicles play critical roles in the platform’s choice of optimal technical function module. In addition, this paper characterizes the conditions under which the pooling service model (using pooling module) and the premier service model (using premier module) can achieve Pareto improvement for the platform and passengers. Furthermore, the authors find that network externalities have a non-monotonic effect on the driver surplus when the platform only develop premier module. Originality/value - This study significantly contributes to the related literature by considering the impacts of the passengers’ heterogeneity and the platform’s openness on the optimal strategy choice of an IT-enabled ride-hailing platform. It also provides function module suggestions to the platform, and guides the platform to improve and develop technical development.