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Anomalous supply shortages from dynamic pricing in on-demand mobility

Author

Listed:
  • Malte Schröder

    (Technical University of Dresden
    Technical University of Dresden)

  • David-Maximilian Storch

    (Technical University of Dresden)

  • Philip Marszal

    (Technical University of Dresden
    Technical University of Dresden)

  • Marc Timme

    (Technical University of Dresden
    Technical University of Dresden
    Lakeside Labs)

Abstract

Dynamic pricing schemes are increasingly employed across industries to maintain a self-organized balance of demand and supply. However, throughout complex dynamical systems, unintended collective states exist that may compromise their function. Here we reveal how dynamic pricing may induce demand-supply imbalances instead of preventing them. Combining game theory and time series analysis of dynamic pricing data from on-demand ride-hailing services, we explain this apparent contradiction. We derive a phase diagram demonstrating how and under which conditions dynamic pricing incentivizes collective action of ride-hailing drivers to induce anomalous supply shortages. We identify characteristic patterns in the price dynamics reflecting these supply anomalies by disentangling different timescales in price time series of ride-hailing services at 137 locations across the globe. Our results provide systemic insights for the regulation of dynamic pricing, in particular in publicly accessible mobility systems, by unraveling under which conditions dynamic pricing schemes promote anomalous supply shortages.

Suggested Citation

  • Malte Schröder & David-Maximilian Storch & Philip Marszal & Marc Timme, 2020. "Anomalous supply shortages from dynamic pricing in on-demand mobility," Nature Communications, Nature, vol. 11(1), pages 1-8, December.
    • Handle: RePEc:nat:natcom:v:11:y:2020:i:1:d:10.1038_s41467-020-18370-3
    DOI: 10.1038/s41467-020-18370-3
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    Cited by:

    1. 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.
    2. Jinxiao Duan & Guanwen Zeng & Nimrod Serok & Daqing Li & Efrat Blumenfeld Lieberthal & Hai-Jun Huang & Shlomo Havlin, 2023. "Spatiotemporal dynamics of traffic bottlenecks yields an early signal of heavy congestions," Nature Communications, Nature, vol. 14(1), pages 1-11, December.
    3. Wamsler, Julia & Natter, Martin & Algesheimer, René, 2022. "Transitioning to dynamic prices: Should pricing authority remain with the company or be delegated to the service employees instead?," Journal of Business Research, Elsevier, vol. 139(C), pages 1476-1488.

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