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Harnessing the Double-edged Sword via Routing: Information Provision on Ride-hailing Platforms

Author

Listed:
  • Leon Yang Chu

    (Department of Data Science and Operations, Marshall School of Business, University of Southern California, USA)

  • Zhixi Wan

    (Department of Operations and Business Analytics, Lundquist College of Business, University of Oregon, USA)

  • Dongyuan Zhan

    (School of Management, University College London, UK)

Abstract

We consider a ride-hailing platform that provides free information to taxi drivers. Upon receiving a rider's request, the platform broadcasts the rider's origin and destination to idle drivers, who accept or ignore the request depending on the profitability considerations. We show that providing such information may reduce drivers' equilibrium profit. Hence information provision is a double-edged sword: the drivers may choose to take more profitable riders via "strategic idling." When multiple drivers compete for the same request, how the platform breaks the tie affects the incentives of the drivers. We propose a routing policy that can align the incentives and achieve the first-best outcome for large systems.

Suggested Citation

  • Leon Yang Chu & Zhixi Wan & Dongyuan Zhan, 2018. "Harnessing the Double-edged Sword via Routing: Information Provision on Ride-hailing Platforms," Working Papers 18-04, NET Institute.
    • Handle: RePEc:net:wpaper:1804
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    2. Wang, Hai & Yang, Hai, 2019. "Ridesourcing systems: A framework and review," Transportation Research Part B: Methodological, Elsevier, vol. 129(C), pages 122-155.
    3. Saif Benjaafar & Ming Hu, 2020. "Operations Management in the Age of the Sharing Economy: What Is Old and What Is New?," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 93-101, January.
    4. Ye, Fei & Ni, Debing & Li, Kevin W., 2021. "Competition between manufacturers and sharing economy platforms: An owner base and sharing utility perspective," International Journal of Production Economics, Elsevier, vol. 234(C).
    5. Kyung Sun (Melissa) Rhee & Jinyang Zheng & Youwei Wang & Yong Tan, 2023. "Value of Information Sharing via Ride-Hailing Apps: An Empirical Analysis," Information Systems Research, INFORMS, vol. 34(3), pages 1228-1244, September.
    6. 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.

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    More about this item

    Keywords

    Ride-hailing Platform; Queuing Game; Information and Incentive; Routing; Taxi Industry;
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