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Regulating the ride-hailing market in the age of uberization

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  • Vignon, Daniel
  • Yin, Yafeng
  • Ke, Jintao

Abstract

The entry of transportation network companies like Uber and Lyft in the ride-hailing market has generated concerns that they unfairly compete against traditional street-hail services. However, regulatory action seeking to address this issue has either been lacking or has resulted in the suspension or restriction of e-hail services. In this paper, we propose a model of competition between these two services and investigate the design of optimal and parsimonious regulation to achieve social efficiency. When the e-hailing platform adopts instantaneous matching with a relatively large matching radius, we analytically show that, absent restrictions, the street-hailing firm has a pricing advantage and can thrive when competing against the e-hailing platform in dense markets or when trip distances are relatively short. Moreover, while a monopolist controlling both firms will tend to internalize some of its congestion externality, we show that congestion can become quite severe in a duopoly setting. However, we show that even when accounting for competition and congestion, regulators only need to regulate the per trip commission that each company earns to maximize social surplus. This provides a potential avenue to simplify the host of regulations, which have historically been a feature of the ride-hailing market and are currently hampering the street-hailing industry.

Suggested Citation

  • Vignon, Daniel & Yin, Yafeng & Ke, Jintao, 2023. "Regulating the ride-hailing market in the age of uberization," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 169(C).
    • Handle: RePEc:eee:transe:v:169:y:2023:i:c:s1366554522003465
    DOI: 10.1016/j.tre.2022.102969
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    References listed on IDEAS

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    2. Sun, Shouheng & Wang, Zhenqin & Wang, Weicai, 2023. "The impact of regulatory policy on the growth of ride-hailing platform: System dynamics perspective," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 632(P2).
    3. Wang, Sicheng & Du, Rui & Lee, Annie S., 2024. "Ridesourcing regulation and traffic speeds: A New York case," Journal of Transport Geography, Elsevier, vol. 116(C).
    4. Jing Gao & Sen Li, 2023. "Regulating For-Hire Autonomous Vehicles for An Equitable Multimodal Transportation Network," Papers 2301.05798, arXiv.org, revised Oct 2023.
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    6. Xu, Yu & Ling, Liuyi & Wu, Jie & Xu, Shengshuo, 2024. "On-demand ride-hailing platforms under green mobility: Pricing strategies and government regulation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 189(C).

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