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

Yanyan Ding, Xiaoshu Ding, Jianing Liu and Sisi Jian

Transportation Research Part E: Logistics and Transportation Review, 2025, vol. 201, issue C

Abstract: 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.

Keywords: Equity constraints; Joint pricing and resource allocation strategy; Tail-raising effects; Plateau; Profit maximization (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.tre.2025.104252

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