Second Degree Price Discrimination on Ride-hailing Platform

Abstract

This paper investigates optimal price mechanism for a monopolistic ride-hailing platform in a two-sided market setting. Our main result shows that the optimal price mechanism depends on the concavity of consumers’ valuation distribution. When con- sumers’ valuation distribution is concave, fully discriminatory price mechanism, which allows each consumer to select her individual optimal price level, generates the highest profit to the platform. On the other hand, when consumers’ valuation distribution is convex, the optimal uniform price mechanism is profit maximizing.