CAREER: Regulating On-Demand Delivery Platforms

University Of Wisconsin-Madison, Madison WI

Investigators

Abstract

This project investigates the regulation of emerging platform organizations in the restaurant industry. Digital technologies have substantially changed the landscape of the industry, with online delivery becoming an essential revenue source for restaurants. Delivery platforms collect customer orders via a mobile app and have drivers pick up the food and deliver it to customers. These platforms, however, have had an uneasy partnership with restaurants. Delivery platforms possess strong power over independent restaurants and set platform fees as high as 30% to extract most of the surplus created on their platforms. Although there are heated debates on whether and how to regulate delivery platforms, the lack of empirical studies hinders the progress towards effective policymaking. This project investigates the impact of delivery platforms on restaurants and the implications for policymakers. The findings from this project advance our knowledge on how on-demand platforms and other powerful platforms create value for businesses, organizations, and our society. This project also enhances our knowledge about how to regulate powerful platforms. Specifically, this project has three objectives: 1) Investigating the Realities of On-Demand Delivery. Whether restaurants benefit from delivery platforms, or what types of restaurants are more likely to benefit (e.g., independent vs. chain) are fundamental questions of importance to restaurant owners and policymakers; 2) Investigating the Effectiveness of Current Regulatory Policies. More than a dozen of cities and states have recently imposed regulations that cap the commissions that delivery platforms can charge. This project investigates if such regulatory policies are effective, and the promises and perils of implementing such regulations; 3) Designing Optimal Regulatory Policies. Building on the findings from 1) and 2), this project seeks to design optimal regulatory policies that improve total social welfare, balancing restaurant revenue, consumer surplus, and the sustainability of the on-demand delivery business. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.