IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v295y2021i3p1008-1024.html
   My bibliography  Save this article

Ride solo or pool: Designing price-service menus for a ride-sharing platform

Author

Listed:
  • Jacob, Jagan
  • Roet-Green, Ricky

Abstract

A ride-sharing platform (RSP), such as Uber or Lyft, can sometimes offer passengers an option to share (pool) the ride with fellow passengers. On the one hand, a passenger who pools benefits from paying a lower fare and the RSP benefits from increasing occupancy per car, thereby serving more passengers. On the other hand, a passenger who pools takes more time, on average, to reach her destination and may have to share the ride with a stranger, and the RSP gets a lower profit margin per passenger than from solo rides. We develop a queueing model to find the RSP’s optimal revenue in equilibrium when passengers are strategic and drivers are independent agents, and design the RSP’s revenue-maximizing price-service menu. We find that offering both solo and pooled rides is optimal when the distribution of passenger-type is not skewed and congestion is not high. Counter intuitively, when congestion is high, the RSP benefits from offering only one ride choice. Simulation-based results extend these findings when more than one route exists. We provide a numerical example based on real-life data. When the number of drivers is endogenous, equilibrium revenue per driver can decrease when the passenger arrival rate increases.

Suggested Citation

  • Jacob, Jagan & Roet-Green, Ricky, 2021. "Ride solo or pool: Designing price-service menus for a ride-sharing platform," European Journal of Operational Research, Elsevier, vol. 295(3), pages 1008-1024.
    • Handle: RePEc:eee:ejores:v:295:y:2021:i:3:p:1008-1024
    DOI: 10.1016/j.ejor.2021.03.058
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221721002885
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2021.03.058?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gérard P. Cachon & Kaitlin M. Daniels & Ruben Lobel, 2017. "The Role of Surge Pricing on a Service Platform with Self-Scheduling Capacity," Manufacturing & Service Operations Management, INFORMS, vol. 19(3), pages 368-384, July.
    2. Jiaru Bai & Kut C. So & Christopher S. Tang & Xiqun (Michael) Chen & Hai Wang, 2019. "Coordinating Supply and Demand on an On-Demand Service Platform with Impatient Customers," Manufacturing & Service Operations Management, INFORMS, vol. 21(3), pages 556-570, July.
    3. Xiaolei Wang & Hai Yang & Daoli Zhu, 2018. "Driver-Rider Cost-Sharing Strategies and Equilibria in a Ridesharing Program," Transportation Science, INFORMS, vol. 52(4), pages 868-881, August.
    4. Philipp Afèche & Haim Mendelson, 2004. "Pricing and Priority Auctions in Queueing Systems with a Generalized Delay Cost Structure," Management Science, INFORMS, vol. 50(7), pages 869-882, July.
    5. Philipp Afèche & Opher Baron & Joseph Milner & Ricky Roet-Green, 2019. "Pricing and Prioritizing Time-Sensitive Customers with Heterogeneous Demand Rates," Operations Research, INFORMS, vol. 67(4), pages 1184-1208, July.
    6. Haim Mendelson & Seungjin Whang, 1990. "Optimal Incentive-Compatible Priority Pricing for the M/M/1 Queue," Operations Research, INFORMS, vol. 38(5), pages 870-883, October.
    7. Sergei V. Savin & Morris A. Cohen & Noah Gans & Ziv Katalan, 2005. "Capacity Management in Rental Businesses with Two Customer Bases," Operations Research, INFORMS, vol. 53(4), pages 617-631, August.
    8. Terry A. Taylor, 2018. "On-Demand Service Platforms," Manufacturing & Service Operations Management, INFORMS, vol. 20(4), pages 704-720, October.
    9. Al-Kanj, Lina & Nascimento, Juliana & Powell, Warren B., 2020. "Approximate dynamic programming for planning a ride-hailing system using autonomous fleets of electric vehicles," European Journal of Operational Research, Elsevier, vol. 284(3), pages 1088-1106.
    10. Furuhata, Masabumi & Dessouky, Maged & Ordóñez, Fernando & Brunet, Marc-Etienne & Wang, Xiaoqing & Koenig, Sven, 2013. "Ridesharing: The state-of-the-art and future directions," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 28-46.
    11. Ragavendran Gopalakrishnan & Sherwin Doroudi & Amy R. Ward & Adam Wierman, 2016. "Routing and Staffing When Servers Are Strategic," Operations Research, INFORMS, vol. 64(4), pages 1033-1050, August.
    12. Choi, Tsan-Ming & Guo, Shu & Liu, Na & Shi, Xiutian, 2020. "Optimal pricing in on-demand-service-platform-operations with hired agents and risk-sensitive customers in the blockchain era," European Journal of Operational Research, Elsevier, vol. 284(3), pages 1031-1042.
    13. Agatz, Niels & Erera, Alan & Savelsbergh, Martin & Wang, Xing, 2012. "Optimization for dynamic ride-sharing: A review," European Journal of Operational Research, Elsevier, vol. 223(2), pages 295-303.
    14. A. Kuczura, 1973. "Loss Systems with Mixed Renewal and Poisson Inputs," Operations Research, INFORMS, vol. 21(3), pages 787-795, June.
    15. Sun, Luoyi & Teunter, Ruud H. & Babai, M. Zied & Hua, Guowei, 2019. "Optimal pricing for ride-sourcing platforms," European Journal of Operational Research, Elsevier, vol. 278(3), pages 783-795.
    16. Pavlin, J. Michael, 2017. "Dual bounds of a service level assignment problem with applications to efficient pricing," European Journal of Operational Research, Elsevier, vol. 262(1), pages 239-250.
    17. repec:adr:anecst:y:1989:i:15-16:p:17 is not listed on IDEAS
    18. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    19. Hong, Ji Hyun & Kim, Byung Cho & Park, Kyung Sam, 2019. "Optimal risk management for the sharing economy with stranger danger and service quality," European Journal of Operational Research, Elsevier, vol. 279(3), pages 1024-1035.
    20. André De Palma & Luc Leruth, 1989. "Congestion and Game in Capacity: a Duopoly Analysis in the Presence of Network Externalities," Annals of Economics and Statistics, GENES, issue 15-16, pages 389-407.
    21. Christopher S. Tang, 2017. "OM Forum—Three Simple Approaches for Young Scholars to Identify Relevant and Novel Research Topics in Operations Management," Manufacturing & Service Operations Management, INFORMS, vol. 19(3), pages 338-346, July.
    22. Boysen, Nils & Briskorn, Dirk & Schwerdfeger, Stefan, 2019. "Matching supply and demand in a sharing economy: Classification, computational complexity, and application," European Journal of Operational Research, Elsevier, vol. 278(2), pages 578-595.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. De Munck, Thomas & Chevalier, Philippe & Tancrez, Jean-Sébastien, 2023. "Managing priorities on on-demand service platforms with waiting time differentiation," International Journal of Production Economics, Elsevier, vol. 266(C).
    2. Fielbaum, Andres & Kucharski, Rafał & Cats, Oded & Alonso-Mora, Javier, 2022. "How to split the costs and charge the travellers sharing a ride? aligning system’s optimum with users’ equilibrium," European Journal of Operational Research, Elsevier, vol. 301(3), pages 956-973.
    3. Sui, Ronghua & Zhang, Xumei & Dan, Bin & Zhang, Haiyue & Liu, Yi, 2023. "Bilateral value-added service investment in platform competition with cross-side network effects under multihoming," European Journal of Operational Research, Elsevier, vol. 304(3), pages 952-963.
    4. Yining Liu & Yanfeng Ouyang, 2022. "Planning ride-pooling services with detour restrictions for spatially heterogeneous demand: A multi-zone queuing network approach," Papers 2208.02219, arXiv.org, revised Jun 2023.
    5. Li, Manzi & Jiang, Gege & Lo, Hong K., 2022. "Pricing strategy of ride-sourcing services under travel time variability," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 159(C).
    6. Zhongbin Wang & Yunan Liu & Lei Fang, 2022. "Pay to activate service in vacation queues," Production and Operations Management, Production and Operations Management Society, vol. 31(6), pages 2609-2627, June.
    7. Liu, Yining & Ouyang, Yanfeng, 2023. "Planning ride-pooling services with detour restrictions for spatially heterogeneous demand: A multi-zone queuing network approach," Transportation Research Part B: Methodological, Elsevier, vol. 174(C).
    8. Hao, Wu & Martin, Layla, 2022. "Prohibiting cherry-picking: Regulating vehicle sharing services who determine fleet and service structure," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 161(C).
    9. Ke, Jintao & Chen, Xiqun (Michael) & Yang, Hai & Li, Sen, 2022. "Coordinating supply and demand in ride-sourcing markets with pre-assigned pooling service and traffic congestion externality," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 166(C).
    10. Jun Tu & Juan Du & Min Huang, 2023. "Competition between Green and Non-Green Travel Companies: The Role of Governmental Subsidies in Green Travel," Sustainability, MDPI, vol. 15(9), pages 1-33, May.
    11. Bahrami, Sina & Nourinejad, Mehdi & Nesheli, Mahmood Mahmoodi & Yin, Yafeng, 2022. "Optimal composition of solo and pool services for on-demand ride-hailing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 161(C).
    12. Zhu, Zheng & Xu, Ailing & He, Qiao-Chu & Yang, Hai, 2021. "Competition between the transportation network company and the government with subsidies to public transit riders," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    13. Zhong, Yuanguang & Lan, Yibo & Chen, Zhi & Yang, Jiazi, 2023. "On-demand ride-hailing platforms with heterogeneous quality-sensitive customers: Dedicated system or pooling system?," Transportation Research Part B: Methodological, Elsevier, vol. 173(C), pages 247-266.
    14. Feng, Nan & Xu, Nan & Feng, Haiyang & Li, Minqiang, 2022. "Turn on instant booking or not? Decisions of rival hosts," Annals of Tourism Research, Elsevier, vol. 96(C).
    15. Li, Manzi & Jiang, Gege & Lo, Hong K., 2023. "Optimal cancellation penalty for competing ride-sourcing platforms under waiting time uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    16. Hung Q. Nguyen & Tuan Phung-Duc, 2022. "Strategic customer behavior and optimal policies in a passenger–taxi double-ended queueing system with multiple access points and nonzero matching times," Queueing Systems: Theory and Applications, Springer, vol. 102(3), pages 481-508, December.
    17. Ravula, Prashanth, 2022. "Monetary and hassle savings as strategic variables in the ride-sharing market," Research in Transportation Economics, Elsevier, vol. 94(C).
    18. Chen, Mingyang & Zhao, Daozhi & Gong, Yeming & Rekik, Yacine, 2022. "An on-demand service platform with self-scheduling capacity: Uniform versus multiplier-based pricing," International Journal of Production Economics, Elsevier, vol. 243(C).
    19. Kanatlı, Mehmet Ali & Karaer, Özgen, 2022. "Servitization as an alternative business model and its implications on product durability, profitability & environmental impact," European Journal of Operational Research, Elsevier, vol. 301(2), pages 546-560.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. De Munck, Thomas & Chevalier, Philippe & Tancrez, Jean-Sébastien, 2023. "Managing priorities on on-demand service platforms with waiting time differentiation," International Journal of Production Economics, Elsevier, vol. 266(C).
    2. Chen, Mingyang & Zhao, Daozhi & Gong, Yeming & Rekik, Yacine, 2022. "An on-demand service platform with self-scheduling capacity: Uniform versus multiplier-based pricing," International Journal of Production Economics, Elsevier, vol. 243(C).
    3. Yang, Jie & Zhao, Daozhi & Wang, Zeyu & Xu, Chunqiu, 2022. "Impact of regulation on on-demand ride-sharing service: Profit-based target vs demand-based target," Research in Transportation Economics, Elsevier, vol. 92(C).
    4. Sui, Ronghua & Zhang, Xumei & Dan, Bin & Zhang, Haiyue & Liu, Yi, 2023. "Bilateral value-added service investment in platform competition with cross-side network effects under multihoming," European Journal of Operational Research, Elsevier, vol. 304(3), pages 952-963.
    5. Zhong, Yuanguang & Yang, Tong & Cao, Bin & Cheng, T.C.E., 2022. "On-demand ride-hailing platforms in competition with the taxi industry: Pricing strategies and government supervision," International Journal of Production Economics, Elsevier, vol. 243(C).
    6. Ke, Jintao & Yang, Hai & Zheng, Zhengfei, 2020. "On ride-pooling and traffic congestion," Transportation Research Part B: Methodological, Elsevier, vol. 142(C), pages 213-231.
    7. Ke, Jintao & Yang, Hai & Li, Xinwei & Wang, Hai & Ye, Jieping, 2020. "Pricing and equilibrium in on-demand ride-pooling markets," Transportation Research Part B: Methodological, Elsevier, vol. 139(C), pages 411-431.
    8. Benioudakis, Myron & Zissis, Dimitris & Burnetas, Apostolos & Ioannou, George, 2023. "Service provision on an aggregator platform with time-sensitive customers: Pricing strategies and coordination," International Journal of Production Economics, Elsevier, vol. 257(C).
    9. Zhong, Yuanguang & Lan, Yibo & Chen, Zhi & Yang, Jiazi, 2023. "On-demand ride-hailing platforms with heterogeneous quality-sensitive customers: Dedicated system or pooling system?," Transportation Research Part B: Methodological, Elsevier, vol. 173(C), pages 247-266.
    10. Guo, Xiaotong & Caros, Nicholas S. & Zhao, Jinhua, 2021. "Robust matching-integrated vehicle rebalancing in ride-hailing system with uncertain demand," Transportation Research Part B: Methodological, Elsevier, vol. 150(C), pages 161-189.
    11. Ke, Jintao & Li, Xinwei & Yang, Hai & Yin, Yafeng, 2021. "Pareto-efficient solutions and regulations of congested ride-sourcing markets with heterogeneous demand and supply," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 154(C).
    12. Meijian Yang & Enjun Xia, 2021. "A Systematic Literature Review on Pricing Strategies in the Sharing Economy," Sustainability, MDPI, vol. 13(17), pages 1-28, August.
    13. Siqin, Tana & Choi, Tsan-Ming & Chung, Sai-Ho, 2022. "Optimal E-tailing channel structure and service contracting in the platform era," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 160(C).
    14. He, Shan & Dai, Ying & Ma, Zu-Jun, 2023. "To offer or not to offer? The optimal value-insured strategy for crowdsourced delivery platforms," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 173(C).
    15. Dong, Zhenning & Leng, Mingming, 2021. "Managing on-demand ridesharing operations: Optimal pricing decisions for a ridesharing platform," International Journal of Production Economics, Elsevier, vol. 232(C).
    16. Sun, Luoyi & Teunter, Ruud H. & Babai, M. Zied & Hua, Guowei, 2019. "Optimal pricing for ride-sourcing platforms," European Journal of Operational Research, Elsevier, vol. 278(3), pages 783-795.
    17. Saif Benjaafar & Harald Bernhard & Costas Courcoubetis & Michail Kanakakis & Spyridon Papafragkos, 2022. "Drivers, Riders, and Service Providers: The Impact of the Sharing Economy on Mobility," Management Science, INFORMS, vol. 68(1), pages 123-142, January.
    18. Meng Li & Guowei Hua & Haijun Huang, 2018. "A Multi-Modal Route Choice Model with Ridesharing and Public Transit," Sustainability, MDPI, vol. 10(11), pages 1-14, November.
    19. Vibhanshu Abhishek & Jose A. Guajardo & Zhe Zhang, 2021. "Business Models in the Sharing Economy: Manufacturing Durable Goods in the Presence of Peer-to-Peer Rental Markets," Information Systems Research, INFORMS, vol. 32(4), pages 1450-1469, December.
    20. Yan, Pengyu & Lee, Chung-Yee & Chu, Chengbin & Chen, Cynthia & Luo, Zhiqin, 2021. "Matching and pricing in ride-sharing: Optimality, stability, and financial sustainability," Omega, Elsevier, vol. 102(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:295:y:2021:i:3:p:1008-1024. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.