Development dilemma of ride-sharing: Revenue or social welfare?

TL;DR

This paper addresses whether ride-sharing can simultaneously boost social welfare and operator revenue. It leverages an agent-based simulation with upfront pricing, pooling, and repositioning, calibrated by a customer elasticity survey across nine Chinese cities. It reveals a development dilemma: ride-sharing can improve social welfare yet erode TNC and driver revenues due to low shareability in some areas, limited distance savings from pooling, and revenue losses when pooling customers with unequal fares. It also finds that monetary gains from carbon reductions are too small to influence behavior, arguing for dynamic pricing or government subsidies to achieve social and environmental benefits. The work provides actionable guidance for pricing design and policy to reconcile efficiency, equity, and profitability in urban ride-sharing.

Abstract

This study investigates the development dilemma of ride-sharing services using real-world mobility datasets from nine cities and calibrated customers' price and detour elasticity. Through massive numerical experiments, this study reveals that while ride-sharing can benefit social welfare, it may also lead to a loss of revenue for transportation network companies (TNCs) or drivers compared with solo-hailing, which limits TNCs' motivation to develop ride-sharing services. Three key factors contributing to this revenue loss are identified: (1) the low successful sharing ratio for customers choosing ride-sharing in some cases, (2) the limited saved trip distance by pooling two customers, and (3) the potential revenue loss when pooling customers with significantly different trip fares. Furthermore, this study finds that the monetary benefits of carbon emission reductions from ride-sharing are not substantial enough to affect customers' choices between solo-hailing and ride-sharing. The findings provide a valuable reference for TNCs and governments. For TNCs, effective pricing strategies, such as dynamic pricing, should be designed to prevent revenue loss when introducing ride-sharing. Governments are suggested to subsidize ride-sharing services to solve the development dilemma and maintain or even increase social welfare benefits from ride-sharing, including reduced carbon emissions and improved vehicle occupancy rates.

Figures (17)

• Figure 1: Temporal distribution of customers' requests in each city.
• Figure 2: Spatial distribution of orders in each city.
• Figure 3: Survey results and calibrated pricing and detour elasticity of customers.
• Figure 4: Illustration of upfront pricing mechanism of mixed solo-hailing and ride-sharing services.
• Figure 5: Illustration of customer-vehicle assignment.