Spatial pricing in ride-sharing networks

By Kostas Bimpikis, Ozan Candogan, Daniela Saban. NetEcon@EC, 2017

475 citations recorded by the source corpus.

We explore spatial price discrimination in the context of a ridesharing platform that serves a network of locations. Riders are heterogeneous in terms of their destination preferences and their willingness to pay for receiving service. Drivers decide whether, when, and where to provide service so as to maximize their expected earnings, given the platform's prices. Our findings highlight the impact of the demand pattern on the platform's prices, profits, and the induced consumer surplus. In particular, we establish that profits and consumer surplus are maximized when the demand pattern is "balanced" across the network's locations. In addition, we show that they both increase monotonically with the balancedness of the demand pattern (as formalized by its structural properties). Furthermore, if the demand pattern is not balanced, the platform can benefit substantially from pricing rides differently depending on the location they originate from. Finally, we consider a number of alternative pricing and compensation schemes that are commonly used in practice and explore their performance for the platform.

Subfields: Automotive Engineering, Marketing, Transportation

View Paper: https://www.semanticscholar.org/paper/2131557bae69548801e0a2a2132de01680125e8f

Citations in the corpus

Dynamic pricing and matching in ride‐hailing platforms (2019, unknown): “Riders could also be incentivized through price to stimulate more demand going towards supply-constrained areas to further improve marketplace eﬃciency (Bimpikis et al. 2016, Banerjee et al. 2017).”
Reinforcement Learning for Non-Stationary Markov Decision Processes: The Blessing of (More) Optimism (2020, unknown): “, 2016), consumer choice modeling (Xu & Yun, 2020), ride-sharing (Taylor, 2018; Gurvich et al., 2018; Bimpikis et al., 2019; Kanoria & Qian, 2019), healthcare operations (Shortreed et al.”
Surge Pricing Solves the Wild Goose Chase (2017, unknown): “The next most closely related set of papers are those that analyze other aspects of surge pricing, such as the welfare analysis in Cachon et al. (2017). Other papers about ride hailing consider profit-maximizing pricing (Afeche et al.”