The economics of food delivery platforms

The problem for the restaurants is that the more successful the “aggregators” of customer demand become over time, the less power the restaurants themselves have individually.

The platform economy as it is currently constituted—highly centralized, highly mediated, with critical decisions made by a select few—risks replicating the same problems that have led to widespread burnout, financial precarity, and erosion of workers’ rights in the traditional economy.

Grubhub’s original model was a marketplace for consumers to order food from independent restaurants that already had their own delivery fleets. Though this was a game-changer for consumers, it constrained supply to only listing restaurants that could perform their own deliveries. This was a mistake.

Customers still demand delivery but it’s now obvious that the existing delivery app business model is not sustainable for restaurant owners

Economists now recognize that many industries, including the manufacture of software platforms, are guided by economic principles that differ in important ways from those that govern traditional industries. Many of these two-sided or multisided industries are subject to network effects, which were studied extensively by economists during the 1980s

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