Competing Platforms and Transport Equilibrium
Econometrica · 2025 · Volume 93 · Issue 6
Abstract
I study whether platform competition in app-based transportation generates waste and whether consolidating competing networks would improve efficiency. I build a spatial model of a ride-hailing market where competing platforms set prices strategically and estimate it using detailed data from two major platforms in New York City. Comparing the status quo to simulated counterfactuals, I find that: (i) platform market power and the fragmentation of users across networks cause a $176 million annual loss in social welfare and waste 21% of driver-generated traffic; (ii) a platform merger would trade off gains from pooling all users into a single network against harms from greater market power, reducing traffic by 8% but lowering consumer surplus by $77 million per year due to a 4% price hike; and (iii) interoperability regulations would bring these gains without undermining competition, reducing wasteful traffic by 6% while raising consumer surplus by $63 million per year.
Keywords
Platform competition, market power, network effects, interoperability, platform mergers, multi-homing, two-sided markets, transportation, ride-hailing
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