Pricing and quality decisions for standardized and collaborative services in a home health care service platform

Abstract

Home health care service platforms (HHCSPs) serve older consumers by gathering informal caregivers who offer standardized care services and/or collaborative care services. These platforms aim to maximize both profit and consumer surplus by motivating participants to make proper price and quality decisions. Service prices can be determined by an HHCSP or an informal caregiver, leading to four scenarios: standardized service pricing by platform (PLS scenario), standardized service pricing by informal caregiver (ICS scenario), collaborative service pricing by platform (PLC scenario), and collaborative service pricing by informal caregiver (ICC scenario). We develop an analytical model to examine the service price and quality decisions based on these four scenarios. We find that the preferred scenarios of the HHCSP and the informal caregiver are those in which they can take the power of pricing. In most cases, the preferred scenario of the informal caregiver (HHCSP) will more likely evolve from the ICCPLC scenario to the ICSPLS scenario as the informal caregiver becomes more efficient. The HHCSP focusing on consumer surplus may not help generate many more economic benefits. Social welfare can be maximized under the ICS, PLS and PLC scenarios, while it is always lowest under the ICC scenario. In addition, we propose two contracts to increase collaboration between platforms and informal caregivers. The findings are robust in two extensions where both categories of service coexist and where the service rate affects the market demand.