Shared-Ride Efficiency of Ride-Hailing Platforms

Terry A. Taylor ()
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Terry A. Taylor: Haas School of Business, University of California, Berkeley, Berkeley, California 94720

Manufacturing & Service Operations Management, 2024, vol. 26, issue 5, 1945-1961

Abstract: Problem definition: Ride-hailing platforms offering shared rides devote effort to reducing the trip-lengthening detours that accommodate fellow customers’ divergent transportation needs. By reducing shared-ride delay, improving shared-ride efficiency has the twin benefits of making shared rides more attractive to customers and increasing the number of customers a driver can serve per unit time. Methodology/results: We analytically model a ride-hailing platform that can offer individual rides and shared rides. We establish results that are counter to naive intuition: greater customer sensitivity to shared-ride delay and greater labor cost can reduce the value of improving shared-ride efficiency, and an increase in shared-ride efficiency can prompt a platform to add individual-ride service. We show that when network effects are small, increasing shared-ride efficiency pushes wages to extremes : if the current wage is high (low), increasing shared-ride efficiency pushes the wage higher (lower). We provide a sharp characterization of whether shared-ride efficiency and labor supply are complements or substitutes. We provide simple conditions under which increasing shared-ride efficiency reduces (alternatively, increases) labor welfare. We provide evidence that increasing shared-ride efficiency increases consumer surplus. Managerial implications: Our results inform a platform’s decision of whether to invest in improving shared-ride efficiency, as well as how to change its service offering and wage, as shared-ride efficiency improves.

Keywords: service operations; ride-hailing (search for similar items in EconPapers)
Date: 2024
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