Abstract
In this paper, we construct a fully covered duopoly market model. In this market, two home-sharing platforms provide differentiated rental services to consumers, respectively, and each platform has two strategies: short-term rental strategy and long-term rental strategy. This paper studies the pricing decisions and service investment of home-sharing platforms in a competitive market. The results show that, in the market equilibrium, how the platform chooses the strategy largely depends on the service quality of competitors. Specifically, when the difference in service quality is small, it is better for the two platforms to adopt the short-term rental strategy; otherwise, the two platforms are more inclined to adopt the long-term rental strategy. We also find that the commission rate and service cost will also affect the profitability of the platform. Finally, we extend the model to the uncovered market.
Highlights
In recent years, some online platforms have emerged in the accommodation industry to promote home-sharing, such as Airbnb, Homeway, Booking.com, and VRBO [1]
We examine a duopoly housing sharing platform market, in which two platforms provide rental services to consumers
The equilibrium price and profit are given by using game theory, and the market equilibrium is analyzed to determine the applicable conditions of each strategy
Summary
Some online platforms have emerged in the accommodation industry to promote home-sharing, such as Airbnb, Homeway, Booking.com, and VRBO [1]. This paper focuses on the optimal pricing decisions and service investment of the home-sharing platform under the competitive environment and examines the impact of commission rate and service cost on the platform’s profit. Different from the above research, we focus on the optimal pricing decision and service level investment of home-sharing platforms under a competitive environment. Gal-Or studies the competition between the home-sharing platform and traditional hotels, and the results show that if the service fee of the platform is low enough, the consumer surplus will increase [18]. Different from the above research, we consider both the optimal pricing decision and service level investment for home-sharing platforms. We find that the service price and service level are related to factors such as the intrinsic value and commission rate of the services of its competitors
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