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Managing on-demand ridesharing operations: Optimal pricing decisions for a ridesharing platform

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  • Dong, Zhenning
  • Leng, Mingming

Abstract

We investigate an on-demand ridesharing system consisting of a ridesharing platform, multiple drivers, and multiple passengers. We begin by analyzing a choice problem for a passenger who chooses either a ridesharing or taxi service and also studying a choice problem for a driver who decides on whether or not to serve. Then, we obtain the ridesharing platform’s optimal service price charged to passengers and its optimal wage paid to drivers. We perform sensitivity analysis to draw a number of managerial implications. An increase in the number of potential passengers (drivers) usually results in an increase (a decrease) in both the price and wage. We also find that the platform is better off when both the number of passengers and the number of drivers are higher, and an increase in the passengers’ mental costs for the taxi service can help increase the platform’s profit. Moreover, the dynamic pricing strategy can not only improve the platform’s profit but also generate larger surpluses to passengers and drivers.

Suggested Citation

  • Dong, Zhenning & Leng, Mingming, 2021. "Managing on-demand ridesharing operations: Optimal pricing decisions for a ridesharing platform," International Journal of Production Economics, Elsevier, vol. 232(C).
    • Handle: RePEc:eee:proeco:v:232:y:2021:i:c:s0925527320303108
    DOI: 10.1016/j.ijpe.2020.107958
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    References listed on IDEAS

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    Cited by:

    1. Paolo Delle Site & André de Palma & Samarth Ghoslya, 2021. "Social optimality and stability of matchings in peer-to-peer ridesharing," THEMA Working Papers 2021-17, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    2. Zhao, Meng & Li, Bin & Ren, Jiali & Hao, Zhihua, 2023. "Competition equilibrium of ride-sourcing platforms and optimal government subsidies considering customers’ green preference under peak carbon dioxide emissions," International Journal of Production Economics, Elsevier, vol. 255(C).
    3. Kim, Youngsoo, 2022. "Taxi driver’s learning curves: An empirical analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 166(C), pages 1-13.
    4. Meijian Yang & Enjun Xia, 2021. "A Systematic Literature Review on Pricing Strategies in the Sharing Economy," Sustainability, MDPI, vol. 13(17), pages 1-28, August.
    5. Chen, Mingyang & Zhao, Daozhi & Gong, Yeming & Rekik, Yacine, 2022. "An on-demand service platform with self-scheduling capacity: Uniform versus multiplier-based pricing," International Journal of Production Economics, Elsevier, vol. 243(C).

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