The Effects of Price Subsidy on Take-away Pricing and Revenue

With the competition becoming more fiercer in the online take-away industry, it is a key issue to achieve a win-win situation for both parties, i.e., the take-away platform and the restaurant. In this paper, we establish a Stackelberg game model for the online take-away business, and derive the optimal pricing strategies for both parties under two main scenarios with and without price subsidy, respectively. By comparing the two scenarios, we find that the restaurant will always increase the sales price under the scenario with price subsidy, when the subsidy threshold is not too high. Moreover, the increased price is proportional to the subsidy intensity, and can always bring more benefits for both parties.