Optimal revenue sharing in platform markets: a Stackelberg model
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Because of its ability to generate many revenue streams, the platform business has received much attention in recent years, and the revenue sharing problem between platform providers and service providers is a key issue. We adopted the Stackelberg model to analyze the optimal revenue sharing rates between these two parties when the platform provider acts as a leader, while the service providers are followers. We derive the closed form of optimal revenue sharing rates as the equilibrium of the Stackelberg model. Numerical experiments with graphical illustrations are presented to demonstrate the optimality of revenue sharing rates whereby the two parties maximize their own profits. In addition, on the basis of the results of optimal revenue sharing rates, the present study performs sensitivity analyses with regard to various exogenous variables that could affect the optimal revenue sharing rates. Our findings indicate that potential demand was the most significant factor in affecting optimal revenue sharing. Therefore, decision makers should carefully monitor their platform business markets to maximize the profits of all the parties involved.
KeywordsRevenue management Revenue sharing Platform business Stackelberg model
This work was supported by the Research Resettlement Fund for the new faculty of Seoul National University. The authors appreciate the administrative support for this work from the Institute for Industrial Systems Engineering of Seoul National University.
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