Publication Type

Conference Proceeding Article

Version

publishedVersion

Publication Date

12-2018

Abstract

Surge pricing is commonly used in on-demand ride-sourcing platforms (e.g., Uber, Lyft and Didi) to dynamically balance demand and supply. However, since the price for ride service cannot be unlimited, there is usually a reasonable or legitimate range of prices in practice. Such a constrained surge pricing strategy fails to balance demand and supply in certain cases, e.g., even adopting the maximum allowed price cannot reduce the demand to an affordable level during peak hours. In addition, the practice of surge pricing is controversial and has stimulated long debate regarding its pros and cons. To address the limitation of current surge pricing practice, we propose a novel reward scheme integrated with surge pricing: users can pay an additional amount on top of the regular surge price to a reward account during peak hours, and then use the balance in the reward account to compensate for their trips during off-peak hours. We explore the reward scheme from three perspectives: user utility, driver income, and platform revenue and profit. We find that, in some situations, all the three stakeholders, i.e., users, drivers, and the platform, will be better off under the reward scheme integrated with surge pricing.

Keywords

Driver Income, Platform Revenue, Reward Scheme, Ride-sourcing, Surge Pricing, User Utility

Discipline

Computer Sciences | Operations Research, Systems Engineering and Industrial Engineering | Transportation

Research Areas

Information Systems and Management

Publication

Transportation Systems in the Connected Era: Proceedings of the 23rd International Conference of Hong Kong Society for Transportation Studies HKSTS 2018: Hong Kong, December 8-10

First Page

209

Last Page

218

ISBN

9789881581471

Identifier

10.2139/ssrn.3198081

Publisher

HKSTS

City or Country

Hong Kong

Additional URL

https://doi.org/10.2139/ssrn.3198081

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