Modeling the Partnership between On-Demand Meal Delivery Platform and Restaurants in a Three-Sided Market

Abstract

Despite the rapid expansion of on-demand meal delivery (ODMD), many restaurants have lost their incentives to participate due to high commission costs. Inspired by this issue, this paper studies an ODMD system with a single platform, strategic restaurants, free-lancing couriers, and customers sensitive to price and service quality. We first formulate the three-sided market equilibrium among customers, couriers, and restaurants, and then integrate it into the platform’s service design problem in the bi-level programming framework. Our results indicate that a lower commission rate incentivizes restaurants to offer discounts to customers. This helps boost demand and create a win-win situation that benefits all stakeholders. Conversely, a higher commission rate pushes restaurants to impose surcharges on orders, leading to a sharp decline in demand and ultimately jeopardizing system efficiency. Similar negative consequences are observed when the minimum per-order profit for restaurants increases beyond a certain threshold.