For better or worse? The impacts of autonomous vehicles on competitive ride-hailing platforms

Autonomous vehicles (AVs) have the potential to reshape the ride-hailing industry by lowering operating costs. While many platforms view AV introduction as a key strategic move, its profitability implications remain uncertain. This study develops a stylized game-theoretic model of two competing ride-hailing platforms to examine the strategic role of AV introduction. The model incorporates key market factors, including consumer-side and driver-side competition as well as the balance between supply and demand. Our analysis shows that the effects of AV introduction on platforms are determined by the trade-off between two concurrent effects: a vehicle supply effect, which alleviates competition in the driver market; a consumer competition effect, which intensifies competition in the consumer market. When only one platform introduces AVs, the competitor is not necessarily worse off if driver-market competition is fierce. When both platforms introduce AVs, profits may rise under intense driver competition but decline under strong consumer competition. Moreover, the strategic interaction in platforms’ choices regarding AV introduction may lead to a prisoner’s dilemma in which both platforms introduce AVs but end up worse off than in the absence of adoption. Finally, we highlight the first-mover advantage, showing that delayed AV introduction after a competitor can reduce profitability.