Balanced scales representing flexibility in a two-sided platform

The Flexibility Fix: How Two-Sided Platforms Can Boost Efficiency

Jordan Keane in Business & Economy December 2025 • 4 min read.

"Unlock hidden potential by strategically balancing flexibility on both the demand and supply sides of your platform."

In the fast-paced world of operations management, flexibility is the key to success. It enables businesses to adapt to ever-changing customer demands, service requirements, and resource allocation challenges. This is especially true for two-sided platforms, where flexibility manifests as the compatibility between different user groups.

Platform operators often focus on improving flexibility on either the demand or supply side independently. However, effectively managing a platform requires considering how flexibility on one side interacts with the other. This article dives deep into the concept of two-sided flexibility in matching platforms, offering insights on how to allocate flexibility to maximize overall platform efficiency.

Traditional approaches often overlook the crucial question: How should flexibility be jointly allocated across different sides of a platform? This article explores this question, drawing from a parsimonious matching model in random graphs to identify the optimal flexibility allocation strategy that maximizes the expected size of a maximum matching.

Why Two-Sided Flexibility Matters: Beyond One-Sided Solutions

Balanced scales representing flexibility in a two-sided platform

Modern service platforms grapple with uncertainty on both the demand and supply fronts, making flexibility a valuable asset. Consider ride-hailing apps: they face a bipartite structure where riders (demand) connect with drivers (supply). The links between them represent compatibility. These platforms then leverage these connections to match riders and drivers.

While traditional manufacturing emphasizes fixed compatibility, modern platforms operate in a more fluid environment. For instance, features like “Wait and Save” incentivize riders to be flexible with their pickup times. This expands the pool of potential drivers, creating more efficient matches. Unlike setting up machinery in a plant, platforms can't force this flexibility; they provide incentives.

Flexibility Cannibalization: This is the one-sided allocation, where the flexible nodes form edges with each other and their degree increases, incident edges are wasted since each flexible node can only be matched once.
Flexibility Asymmetry: Here the regular nodes on the same side as the flexible nodes cannot have any flexible neighbors and are thus much less likely to form any edges at all when compared to regular nodes on the opposite side. The asymmetry can result in a large number of degree-0 nodes in the one-sided allocation, leaving the isolated nodes unmatched.

Two key effects govern the optimal flexibility allocation strategy: flexibility cannibalization and flexibility asymmetry. Flexibility cannibalization occurs when flexible agents connect with each other instead of regular agents, wasting potential matches. Flexibility asymmetry arises when one side of the platform is far more flexible than the other, leading to imbalances in matching opportunities.

Turning Insights into Action: Experimentation and Adaptability

Understanding these dynamics is essential for platform operators. By accounting for flexibility cannibalization and asymmetry, businesses can fine-tune their incentive mechanisms, leading to improved matching efficiency and user satisfaction. The key is to think beyond one-sided solutions and adopt a holistic view of flexibility allocation across your platform.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2404.04709,

Title: Two-Sided Flexibility In Platforms

Subject: econ.gn q-fin.ec stat.ap

Authors: Daniel Freund, Sébastien Martin, Jiayu Kamessi Zhao

Published: 06-04-2024

Everything You Need To Know

What is two-sided flexibility in the context of matching platforms, and why is it important?

Two-sided flexibility refers to the strategic allocation of adaptability on both the demand and supply sides of a platform to optimize matching efficiency. It's crucial because modern service platforms face uncertainties on both fronts. By understanding and managing the interplay between flexibility on both sides, platform operators can improve matching outcomes, enhance user satisfaction, and adapt to changing market conditions. Overlooking this dynamic can lead to suboptimal performance and missed opportunities for growth.

What are flexibility cannibalization and flexibility asymmetry, and how do they impact matching efficiency on a two-sided platform?

Flexibility cannibalization occurs when flexible agents on a platform primarily connect with each other instead of regular agents, leading to a wastage of potential matches since each flexible node can only be matched once. Flexibility asymmetry arises when there's a significant difference in flexibility between the two sides of the platform, resulting in imbalances in matching opportunities. These two effects can significantly reduce matching efficiency, leading to unmatched agents and underutilization of resources. Platform operators must consider these dynamics when designing flexibility allocation strategies.

How does the concept of flexibility apply to platforms like ride-hailing apps, and what incentives can be used to enhance it?

In ride-hailing apps, flexibility is evident in the ability of riders (demand) to adjust their pickup times or locations, and drivers (supply) to accept varying ride requests. Incentives like "Wait and Save" encourage riders to be flexible with their pickup times, increasing the pool of potential drivers and improving matching efficiency. Unlike traditional manufacturing where compatibility is fixed, platforms provide incentives to foster flexibility, dynamically adjusting to real-time conditions and optimizing resource allocation.

What are some of the risks associated with only focusing on one side of a two-sided platform when implementing flexibility?

Focusing solely on one side of a two-sided platform when implementing flexibility can lead to issues like flexibility cannibalization and flexibility asymmetry. These effects diminish overall platform efficiency by either wasting potential matches due to flexible agents connecting with each other, or creating imbalances that leave many agents unmatched. A holistic approach that considers the interplay between both the demand and supply sides is essential for maximizing platform performance.

How can platform operators use the understanding of flexibility cannibalization and asymmetry to improve their platforms?

Platform operators can use the understanding of flexibility cannibalization and flexibility asymmetry to fine-tune incentive mechanisms and flexibility allocation strategies. By carefully balancing flexibility on both sides of the platform and mitigating the negative effects of these dynamics, operators can improve matching efficiency, reduce the number of unmatched agents, and enhance overall user satisfaction. Experimentation and adaptability are key to identifying the optimal allocation strategy for a specific platform.