In the past few years, in major cities across the country, especially in first- and second-tier cities, you can often see enterprises called "XX car-rental firm", which usually advertises that they cooperate with some ride-sharing platforms, and that drivers renting a car from their firm can enjoy various benefits, such as tilted dispatch orders. This is a coopetition between ride-sharing platforms and car-rental firms, and this kind of coopetition is also a common business strategy when the sharing economy model meets traditional business forms.
When Sharing Economy Meets Traditional Business: Coopetition between Ride-Sharing Platforms and Car-Rental Firms, a study by Prof. Chenglong Zhang of the School of Management and Economics (SME) at The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen), explores the coopetition strategies of online ride-sharing platforms and car-rental firms in the context of the new era of transportation. The study explores the coopetition strategy between ride-sharing platforms and car-rental firms in the context of the new era of transportation, helping ride-sharing platforms and car-rental firms to identify the market conditions conducive to competition, and at the same time to explore the impacts of this strategy on other stakeholders (e.g., drivers and passengers). Recently, the paper was accepted and published by Information Systems Research, a top international journal.
Assistant Professor, School of Management and Economics, CUHK-Shenzhen
Platform Economics, Artificial Intelligence and Decision Science, Blockchain
We examine coopetition between a ride-sharing platform and a car-rental firm. A distinctive aspect of this context is that the platform operates under the sharing-economy model, where the supply is self-scheduled by drivers depending on the wage, whereas the car-rental firm operates under the traditional model with a fixed supply and cost structure. The platform and the car-rental firm compete for riders looking for transportation. If the platform and the rental firm choose to cooperate, they allow a (secondary) driver to rent from the rental firm and drive for the platform. In the absence of cooperation, only those with their own vehicles (i.e., primary drivers) are allowed to drive for the platform. We show that such supply-side (i.e., driver-side) cooperation intensifies the demand-side (i.e., rider-side) price competition and decreases total revenue. Therefore, coopetition is mutually beneficial only when it leads to a significant decrease in the supply or driver cost. Moreover, when coopetition is mutually beneficial, the benefit arises solely because of the improved profit margin from riders that switch from the rental firm to the platform and from those that are switched from primary to secondary drivers under cooperation. We find that cooperation is more likely to occur when the total rider market size is not high, the degree of rider substitutability between the platform and the rental firm is low, and the platform has a significant market-size advantage over the rental firm. Coopetition between the platform and the rental firm benefits the riders and hurts the drivers, but benefits society overall. The presence of cross-side network effects on the platform enhances the incentives to engage in coopetition.