Replacing What Could Be Repaired: A Structural Analysis of Two-Stage Diagnostic Decisions in Managing Shared-Bike Returns
Hailong Cui, Jingxuan Geng, Guangwen Kong(Alphabetical Order)
We consider a diagnosis crowdsourcing platform that allows patients to seek multiple diagnoses from doctors online. We find that using a commission-based pricing mechanism alone may yield a downward distortion on price to prevent the over-participation of doctors compared to a centralized benchmark. By imposing a control limit on the number of diagnoses received per inquiry, the platform can charge a higher price while maintaining the appropriate number of responses from doctors. When patients are sensitive to delays in receiving diagnoses, interestingly, a platform may benefit from a patient’s increased delay sensitivity because it plays a similar role as the control limit by discouraging late-arriving doctors from participating. As a result, the profit improvement from imposing a control limit mechanism may decrease with delay sensitivity. When doctors are heterogeneous in their service quality, the undesirable outcome of low-quality doctors driving out all high-quality doctors may occur. A control limit could not only increase high-quality doctors’ participation by increasing their chances of being rewarded by patients but also increase consumer surplus. We empirically test the predictions and find that it supports the results from the model analysis.