Supplier-Side Mechanism Design for Platforms in a Sharing Economy when Supplier Cost Is Private
COM3 Level 1
SR14, COM3 01-23
Abstract:
Platforms in a sharing economy face suppliers who are heterogeneous in their service quality and their private opportunity cost. Moreover, consumers have heterogeneous valuations of the service offered by the suppliers. We investigate a platform's optimal mechanism for matching suppliers with consumers in the sharing economy. The problem is challenging not only because of the multidimensional heterogeneity (i.e., consumer valuation, supplier quality, and supplier cost) and incomplete information (i.e., supplier cost), but also because a supplier can be matched with at most one consumer and vice versa and the platform's value depends on who is matched with whom. We derive the optimal mechanism and characterize the optimal payment and matching rules. Our optimal mechanism extends the vast literature on mechanism design that has examined analogous issues in other contexts. We compare our optimal mechanism with the prevalent fixed-commission-rate scheme, in which the platform takes a fixed percentage of the price paid by the consumer as a commission, to illustrate the extent of gain the platform can achieve by adopting the optimal mechanism in place of fixed-commission-rate scheme.
Bio:
Chenglong Zhang is an Assistant Professor of Information Systems at The Chinese University of Hong Kong, Shenzhen. His research interests are in sharing economy, economics of information security, fairness and AI, and blockchain. His papers have been published in Management Science, Information Systems Research, and among others.