The equity-efficiency trade-off in transportation: Analyzing the optimal joint pricing and resource allocation strategies under equity constraints

This study examines how to employ equity constraints to mitigate inequities among traveler groups with different income levels, arising from profit-driven practices of mobility service providers (MSPs). We introduce three equity metrics—price, affordability, and surplus equity—to quantify the impacts of government-imposed regulations on pricing and resource allocation decisions of the MSP. The basic modeling framework is extended to incorporate heterogeneous supply–demand congestion and operational costs across different traveler groups, offering a more comprehensive understanding of how equity regulations shape market structure. In a representative case with both high- and low-income travelers, we find that equity constraints raise prices for the high-income group while lowering them for the low-income group compared to the unregulated market, thereby improving social welfare at the cost of reduced MSP profits. However, as wealth disparity increases, equity interventions may induce a tail-raising effect or lead to a plateau, where further tightening of constraints causes the MSP to exclude high-income travelers, creating new forms of inequity. Our findings highlight the necessity for carefully designed equity regulations that account for distributional impacts and the trade-off between efficiency and fairness. Policymakers are advised to proactively implement equity regulations before socioeconomic disparities become insurmountable, thus safeguarding equitable access to essential mobility services for travelers.