Pricing with Tips in Three-Sided Delivery Platforms
Yannai A. Gonczarowski, Gary Qiurui Ma, David C. Parkes

TL;DR
This paper models a three-sided delivery platform incorporating tips, demonstrating how tips influence market equilibrium existence, welfare, and computational complexity, with conditions for efficient and computable equilibria.
Contribution
It introduces a model for tipping in three-sided platforms, analyzing its impact on equilibrium existence, welfare, and computational challenges, and identifies conditions for efficient solutions.
Findings
With tips, equilibrium always exists, unlike without tips.
Optimal with-tip equilibria have higher or equal welfare compared to without tips.
Efficient equilibria may not always exist; computing optimal welfare is NP-hard.
Abstract
We model a delivery platform facilitating transactions among three sides: buyers, stores, and couriers. In addition to buyers paying store-specific purchase prices and couriers receiving store--buyer-specific delivery compensation from the platform, each buyer has the option to directly tip for delivery from a specific store. An equilibrium consists of prices, compensations, tips, and transactions that clear the market, such that buyers receive deliveries from preferred stores considering the prices and tips they pay, and couriers deliver preferred orders considering the compensations and tips they receive. We illustrate the role of tips in pricing: Without tips, an equilibrium is only guaranteed to exist when there are at least as many couriers as buyers or stores. In contrast, with tips an equilibrium always exists. From an efficiency perspective, the optimal with-tip equilibrium…
Peer Reviews
No public reviews on file for this paper yet. If you reviewed it on a platform where reviews are public (OpenReview, ICLR, NeurIPS, ICML), you can paste yours below so the community can read it here.
Videos
No videos yet. Explain this paper in a talk, walkthrough, or lecture? Add one.
Taxonomy
TopicsTransportation and Mobility Innovations · Consumer Market Behavior and Pricing · Digital Platforms and Economics
