Supply regulation under the exclusion policy in a ride-sourcing market

Publication Type

Journal Article

Publication Date

12-2022

Abstract

On-demand ride-sourcing platforms have quickly emerged and become ubiquitous in our daily lives. Motivated by the rising public concern about service quality in the ride-sourcing market, this paper aims to examine the impact of exclusion policy that can serve as both quality management and supply regulation strategy. With an exclusion policy, the platform excludes low-quality service providers/drivers from the ride-sourcing market by setting a quality threshold of admission (QTA). We propose a model to describe and analyze the market equilibrium under the exclusion policy and present our analytical and numerical results – some of which are non-intuitive and intriguing. Considering network effects captured by both quality and quantity of service in the market, we find that both the realized supply and total labor welfare are not reduced but rather increase when the platform implements a well-designed exclusion policy. Whereas the platform’s profit, customer surplus, labor welfare, and social welfare are each non-monotonic in the QTA level – first increasing and then decreasing – a moderate level of QTA can benefit all stakeholders (platform, drivers, and passengers) in the market. We also analyze the model with alternative network effects and present the theoretical and numerical results. Using the model, we further identify the principal factors in determining the optimal exclusion policy; these include passengers’ quality preference, labor pool size, and quality differentiation among registered drivers.

Keywords

Ride-sourcing services, Supply regulation, Ex-ante quality management, Exclusion policy, Quality threshold of admission

Discipline

Artificial Intelligence and Robotics | Databases and Information Systems

Research Areas

Data Science and Engineering

Publication

Transportation Research Part B: Methodological

Volume

166

First Page

69

Last Page

94

ISSN

0191-2615

Identifier

10.1016/j.trb.2022.10.005

Publisher

Elsevier

Additional URL

https://doi.org/10.1016/j.trb.2022.10.005

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