An on-demand service platform with self-scheduling capacity: Uniform versus multiplier-based pricing

On-demand service platforms use multiplier-based pricing to provide services via self-scheduling participants. In a multiplier-based pricing scheme, consumers pay lower prices during non-peak periods and higher prices equal to the non-peak period price multiplied by a surge multiplier during peak periods. However, the reasons underlying multiplier-based pricing and when it should be used remain unclear. In this paper, we examine the effects of two pricing schemes—uniform pricing and multiplier-based pricing—on platform profits, participant payoff, and consumer surplus by formulating game-based models, and investigate the conditions and feasible region for use of multiplier-based pricing. The results show that the non-peak price in the multiplier-based pricing scheme is lower than the uniform price, which is in line with reality. When the number of potential participants in non-peak periods is larger, the multiplier-based pricing model generates more profits if compensation ratios in the two models are higher or the compensation ratio in the multiplier-based pricing model is lower. Participants are better off joining a platform that uses uniform pricing given one of the following conditions: lower commission ratio in the two models, lower compensation ratio in the multiplier-based pricing model and higher commission ratio in the two models, and higher commission and compensation ratios in the two models. Consumers are better off in the uniform pricing model if the proportion of non-peak periods, consumer sensitivity to surge multiplier change, and the ratio of potential participants in peak and non-peak periods are higher.