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Transaction or Membership? Impact on On-Demand Delivery Service Platforms’ Profits, Consumer Surplus, and Labor Welfare

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Abstract

In recent years, two pricing policies are commonly adopted by on-demand delivery service platforms (e.g., Meituan PaoTui and Costco) that provide delivery services to heterogeneous customers via self-scheduling providers. One called “transaction-based” pricing policy (TBPP) allows the platforms to determine a per-service wage paid to providers and a price charged to customers for each transaction. The other one called “membership-based” pricing policy (MBPP) also allows the platforms to announce a wage paid to providers but charge customers a membership fee for using an unlimited number of the services in a certain period (e.g., one month). This paper considers an on-demand delivery service platform with self-scheduling providers and two classes of customers (i.e., regular and frequent customers). We aim to analyze and compare the platform’s profits and welfare performances generated by the two pricing policies. If the number of regular customers and their preference for TBPP equal the number of frequent customers and their preference for MBPP, respectively, we show that compared with the MBPP, employing the TBPP is beneficial for the platform but is detrimental for customers and providers. However, adopting the MBPP (TBPP) can simultaneously benefit the platform, customers and providers if frequent customers’ preference for MBPP is higher (lower) than regular customers’ preference for TBPP or the number of frequent customers is larger (less) than regular customers.

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Acknowledgments

Xiaogang Lin is the corresponding author. We thank the Editor(s) and two anonymous referees for their constructive and insightful comments, which help us significantly improve the quality of our paper. This paper was supported by the National Natural Science Foundation of China under Grant No. 72001048.

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Authors and Affiliations

  1. School of Business Administration, South China University of Technology, Guangzhou, 510640, P.R. China

    Danna Chen, Yongwu Zhou & Xinxin Guan

  2. School of Management, Guangdong University of Technology, Guangzhou, 510520, P.R. China

    Xiaogang Lin

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  1. Danna Chen
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  2. Yongwu Zhou
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Correspondence to Xiaogang Lin.

Additional information

Danna Chen is a Ph.D. candidate of School of Business Administration at South China University of Technology (SCUT), Guangzhou, Guangdong Province. Her areas of expertise include operations management in information-sharing and pricing in two-sided markets.

Yongwu Zhou is a professor of School of Business Administration at South China University of Technology (SCUT), Guangzhou, Guangdong Province. He received his Ph.D. degree in Management Science and Engineering from Hefei University of Technology in 2002. In 2013, he got second prize of outstanding achievements in humanities and social sciences. His areas of expertise include inventory model and associated methods, supply chain management and optimization methods.

Xinxin Guan received her MS degree in management science and engineering from School of Business Administration at South China University of Technology (SCUT), Guangzhou, Guangdong Province. Her area of expertise is pricing in two-sided markets.

Xiaogang Lin is an associate professor of School of Management at Guangdong University of Technology, Guangzhou, Guangdong Province. He received his Ph.D. degree in School of Business Administration from South China University of Technology in 2019. His areas of expertise include operations management in sharing economy and pricing in two-sided markets.

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Chen, D., Zhou, Y., Guan, X. et al. Transaction or Membership? Impact on On-Demand Delivery Service Platforms’ Profits, Consumer Surplus, and Labor Welfare. J. Syst. Sci. Syst. Eng. 31, 563–593 (2022). https://doi.org/10.1007/s11518-022-5538-4

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