Harnessing the Double-edged Sword via Routing: Information Provision on Ride-hailing Platforms

Leon Yang Chu (), Zhixi Wan () and Dongyuan Zhan ()
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Leon Yang Chu: Department of Data Science and Operations, Marshall School of Business, University of Southern California, USA
Zhixi Wan: Department of Operations and Business Analytics, Lundquist College of Business, University of Oregon, USA
Dongyuan Zhan: School of Management, University College London, UK

No 18-04, Working Papers from NET Institute

Abstract: We consider a ride-hailing platform that provides free information to taxi drivers. Upon receiving a rider's request, the platform broadcasts the rider's origin and destination to idle drivers, who accept or ignore the request depending on the profitability considerations. We show that providing such information may reduce drivers' equilibrium profit. Hence information provision is a double-edged sword: the drivers may choose to take more profitable riders via "strategic idling." When multiple drivers compete for the same request, how the platform breaks the tie affects the incentives of the drivers. We propose a routing policy that can align the incentives and achieve the first-best outcome for large systems.

Keywords: Ride-hailing Platform; Queuing Game; Information and Incentive; Routing; Taxi Industry (search for similar items in EconPapers)
Pages: 43 pages
Date: 2018-09
New Economics Papers: this item is included in nep-gth and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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