Taxi market equilibrium with third-party hailing service

Xinwu Qian and Satish V. Ukkusuri

Transportation Research Part B: Methodological, 2017, vol. 100, issue C, 43-63

Abstract: With the development and deployment of new technologies, the oligopolistic taxi industry is transforming into a shared market with coexistence of both traditional taxi service (TTS) and app-based third-party taxi service (ATTS). The ATTS is different from TTS in both entry policy and fare setting, and brings competition into the market. To account for the revolution of the taxi industry, in this study, we analyze the characteristics of the TTS and ATTS, model the taxi market as a multiple-leader-follower game at the network level, and investigate the equilibrium of taxi market with competition (TMC Equilibrium). In particular, passengers are modeled as the leaders who seek to minimize their travel cost associated with taxi rides. Followers involve TTS and ATTS drivers, who compete for passengers to maximize their revenue. The network model captures selfish behavior of passengers and drivers in the taxi market, and we prove the existence of TMC Equilibrium for the proposed model using variational inequality formulations. An iterative algorithm is further developed to find the TMC Equilibrium, which corresponds to the strongly stationary point of the multi-leader-follower game. Based on numerical results, it is observed that fleet size and pricing policy are closely associated with the level of competition in the market and may have significant impact on total passengers cost, average waiting time, and fleet utilization.

Keywords: Multiple-leader-follower game; Taxi; TMC equilibrium; Generalized Nash equilibrium problem; Surge pricing; Strongly stationary point (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (24)

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DOI: 10.1016/j.trb.2017.01.012

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