Surge pricing and labor supply in the ride-sourcing market

Liteng Zha, Yafeng Yin and Yuchuan Du

Transportation Research Part B: Methodological, 2018, vol. 117, issue PB, 708-722

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.

Keywords: Ride-sourcing; Labor supply; Surge pricing; Work schedule; Time-Expanded Network (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (39)

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DOI: 10.1016/j.trb.2017.09.010

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