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Surge pricing and labor supply in the ride-sourcing market

Author

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  • Zha, Liteng
  • Yin, Yafeng
  • Du, Yuchuan

Abstract

This study proposes equilibrium models under different behavioral assumptions of labor supply in a ride-sourcing market and then investigates the performance of surge pricing. A time-expanded network is first proposed to delineate possible work schedules of drivers. Based on the proposed network, we provide formulations and algorithms for both neoclassical and income-targeting hypotheses to characterize the labor supply of ride-sourcing drivers, i.e., their choices of work hours. We then investigate the impact of surge pricing using a bi-level programming framework, with the lower-level problem capturing the equilibrium work hour choices while the upper-level one representing revenue-maximizing surge pricing. Compared to static pricing, the platform and drivers are found to generally enjoy higher revenue while customers may be made worse off during highly surged periods. Lastly, a simple regulation scheme to reduce market power is discussed.

Suggested Citation

  • Zha, Liteng & Yin, Yafeng & Du, Yuchuan, 2018. "Surge pricing and labor supply in the ride-sourcing market," Transportation Research Part B: Methodological, Elsevier, vol. 117(PB), pages 708-722.
    • Handle: RePEc:eee:transb:v:117:y:2018:i:pb:p:708-722
    DOI: 10.1016/j.trb.2017.09.010
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