Membership Plan Decision for Ride-Hailing Platforms in the Sharing Economy

Membership programs, common in various industries, involve consumers paying an upfront fee for free access to products or services during a set period. This study explores why a ride-hailing platform in the sharing economy might introduce such a program. Unlike traditional markets with fixed supply costs, ride-hailing relies on independent drivers and faces fluctuating availability and costs. The platform adjusts prices and wages based on demand and supply. The study finds the platform should offer a membership program only if the ratio of the expected supply potential to the expected demand potential during the membership period exceeds a threshold. The platform's profit gain from the program comes mainly from membership fees, offsetting reduced operating profit. Rider and driver variability impacts the platform's decision; supply variability reduces the incentive, while demand variability increases it. While beneficial to the platform and drivers, this program disadvantages riders.