Vertical and horizontal fairness concerns in the ride-hailing platform with solo and carpool ride services

With the rapid growth of ride-hailing platforms, drivers have raised concerns about the platform’s commission rate and their compensation not aligning with their service efforts. In this paper, we investigate the impact of drivers’ fairness concerns on operational decisions within ride-hailing services. Specifically, we focus on two types of fairness issues: vertical fairness, which concerns the profit gap between the driver and the platform, and horizontal fairness, which concerns the profit disparity between the solo ride driver and the carpool ride driver. To examine the impact of fairness concerns, we analyze four scenarios: (1) when neither fairness concern is considered (NN), (2) when only the vertical fairness concern is considered (NV), (3) when only the horizontal fairness concern is considered (HN), and (4) when both fairness concerns are considered (HV). Each of these scenarios is modeled as a Stackelberg game, where we examine the interactions between the platform and drivers under different fairness conditions. Our analysis reveals that Vertical fairness effect, arising from the vertical fairness concern, reduces the ride-hailing platform’s profit. In contrast, Horizontal fairness effect, stemming from the horizontal fairness concern, increases the platform’s profit. Additionally, we find that the vertical fairness effect is greater than the horizontal fairness effect when the solo ride service price is sufficiently low, the customer’s inconvenience cost for taking a carpool service is low, or the commission rate between the platform and drivers is high enough. Based on these insights, we provide managerial implications for ride-hailing platform operators on how to optimize platform operations when drivers’ fairness concerns are taken into account.