Mergers Between On-Demand Service Platforms: The Impact on Consumer Surplus and Labor Welfare

Practice- and Policy-Oriented Abstract Mergers between on-demand service platforms have recently become prevalent, resulting in antitrust debates. On the one hand, mergers reduce market competition, raising antitrust concerns, such as potential increases in service prices. On the other hand, merged firms typically enable agents to serve all the customers from previously separate platforms, thereby gaining an advantage from resource pooling. To offer guidelines for resolving these debates, we investigate the impact of a merger between two on-demand service platforms. Our results show that because of the merger-enabled pooling benefit and a cross-side network effect (i.e., customers benefit from more agents and vice versa), a merger can result in a win-win-win outcome, where the platform profits, consumer surplus, and labor welfare are all improved after a merger. The win-win-win outcome is more probable if the premerger market is less saturated or if the market is more differentiated on the customer/agent side. Therefore, antitrust agencies might consider being more lenient toward a merger if the market has room to grow or if the two merging platforms have differentiated features.