Topic: Proportional v.s. Unit Subsidies on A Digital Food Delivery Platform

Lecturer: Professor Xiaolan Zhou , School of Economics, Shandong University

Time: 12:15-13:15p.m. November 9th, 2023

Venue: B321, Zhixin Building, Central Campus

Abstract: Using granular geospatial data from Alibaba's digital food delivery platform in China, we compare proportional subsidy with unit subsidy on different sectors. We build a structural model to analyze the competition between shops of cooked food sector and

uncooked food sectors on a platform, and incorporate cross network effects (CNEs) on a multi-sided market and dynamic evolution of user base. Even though the estimated CNEs are positive, the sector of cooked food and the sector of non-cooked food are still substitutes rather than complements to each other. In terms of the marginal cost of expanding user base, our counterfactual analyses show that unit subsidy is more cost efficient than proportional subsidy, and it is more efficient to subsidize the sector of uncooked food than the sector of cooked food.