Competition between Service Platforms: Myopic vs. Farsighted Stability

Professor Li Qingying, Donghua University

Date:January 14, 2025 (Tuesday)

Time:10：00-11：00 AM

Venue: Room A302, Mingli Building

Abstract

In platform economy, service providers often engage in both demand and supply competition. This competition can be either farsighted or myopic, depending on how the platforms anticipate the reactions of their rivals. Farsighted platforms consider the chains of reactions following their initial deviation and the long-term consequences of their actions, while myopic platforms only focus on the immediate payoff change of their one-step deviation. We study the farsighted stability in service competition between two service platforms and compare the stable outcome with the myopic one. We consider two scenarios: the platforms engage in demand competition only or in both demand and supply competition. For each scenario, we first determine the equilibrium of worker-customer subgame, and then consider the stable outcomes for the service pricing decisions. For the farsighted stability, we follow the concept of the von Neumann-Morgenstern farsightedly stable set. Specifically, we establish the Pareto efficiency and then verify the indirectly dominance to obtain the farsightedly stable outcomes. For the demand competition game, we find that the farsightedly stable outcome coincides with the myopic one in ample- and moderate-size markets but differ in the scarce-size market, and the farsighted outcomes can achieve the same efficiency as the centralized system. For the two-sided competition game, we find that farsighted platforms can coexist in the market with both earning a positive profit, while myopic platforms may lead to an equilibrium with zero profit for all. Farsighted platforms also tend to extract more surplus from both customers and workers than do myopic platforms. However, the platforms’ farsighted behavior still falls short of achieving the optimal profit that a centralized system can attain.

Speaker's Biography

Qingying Li is Professor at the Glorious Sun School of Business and Management, Donghua University. She received her Ph.D. degree in operations management from The Hong Kong Polytechnic University, a Master degree, and a Bachelor degree in mathematics from Shanghai Jiao Tong University. Dr. Li‘s research interests include service operations management and sustainable supply chain management. Her publications appear in journals such as Production and Operations Management, Operations Research Letters, International Journal of Production Economics, Transportation Research Part E, etc.

All interested facultyand studentsare welcome to attend!