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Optimal cancellation penalty for competing ride-sourcing platforms under waiting time uncertainty

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  • Li, Manzi
  • Jiang, Gege
  • Lo, Hong K.

Abstract

This paper investigates the optimal fare and penalty strategy of ride-sourcing platforms in a competing market. When ordering ride-sourcing services, passengers encounter waiting time variability due to the uncertainty in the matching and pickup processes. In some scenarios, some passengers order ride-sourcing services from multiple platforms to save waiting time, which results in subsequent order cancellations. To capture the behavior of order cancellation, this paper derives the cancellation probability based on the perceived inhomogeneous Poisson process. In view of the punishing effect and blocking effect of order cancellation penalty, this paper investigates the impact of order cancellation penalties on market equilibrium and platform revenue. We formulate a game-theoretic framework and obtain the duopoly market equilibrium to explore the optimal pricing (including penalties and fares) of different platforms. By incorporating passenger perceptions into the order cancellation behavior, this study produces insightful pricing schemes for the ride-sourcing platforms.

Suggested Citation

  • Li, Manzi & Jiang, Gege & Lo, Hong K., 2023. "Optimal cancellation penalty for competing ride-sourcing platforms under waiting time uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    • Handle: RePEc:eee:transe:v:174:y:2023:i:c:s1366554523000959
    DOI: 10.1016/j.tre.2023.103107
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    References listed on IDEAS

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    Cited by:

    1. Jiang, Gege & Zhang, Xin & Li, Manzi & Li, Chuanyao, 2024. "The impact of regulatory level of the aggregation platforms on the ride-sourcing market with heterogeneous travelers," Economics of Transportation, Elsevier, vol. 37(C).
    2. Liu, Yuhan & Yang, Hai & Qin, Xiaoran, 2024. "An incentive strategy for the retention of impatient passengers in ride-sourcing markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 189(C).

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