A0911
Title: Optimal commissions and subscriptions in mutual aid platforms
Authors: Yixing Zhao - Guangdong University of Foreign Studies (China) [presenting]
Abstract: An operation mechanism for mutual aid platforms is investigated to develop sustainably and profitably. A mutual aid platform is an online risk-sharing platform for risk-heterogeneous participants, and the platform extracts revenues by charging participants commission and subscription fees. A modelling framework is proposed to identify the optimal commissions and subscriptions for mutual aid platforms. Participants are divided into different types based on their loss probabilities and values derived from the platform. It is presented how these commissions and subscriptions should be set in a mutual aid plan to maximize the platform's revenues. The analysis emphasized the importance of accounting for risk heterogeneity in mutual aid platforms. Specifically, different types of participants should be charged different commissions/subscriptions depending on their loss probabilities and values on the platform. Participants' shared costs should be determined based on their loss probabilities. Adverse selection occurs on the platform if participants with different risks pay the same shared costs. The results also show that the platform's maximum revenue will be lower if the platform charges the same fee to all participants. The numerical results of a practical example illustrate that the optimal commission/subscription scheme and risk-sharing rule result in considerable improvements in platform revenue over the current scheme implemented by the platform.
