Wild goose chase or not? Equilibrium in a hybrid ride-hailing market

Abstract

We consider a hybrid ride-hailing platform, such as Uber, Lyft, and Didi, offering passengers the choice between a ride-sourcing service and a ride-pooling service. A passenger who chooses the ride-sourcing service can enjoy the trip alone, while passengers who pool can benefit from a lower trip fare; however, the latter may take more travel time (i.e., waiting time and in-vehicle time) and may require passengers to share their ride with strangers. When a passenger is matched to a distant driver, the ride-sourcing or ride-pooling service may get stuck in an inefficient wild-goose-chase (WGC) regime, wherein the driver spends a lot of time picking up passengers. To explore the non-WGC regime of ride-sourcing and ride-pooling services in the hybrid ride-hailing market, we build an equilibrium model that maximizes the profit of the platform, obtain the optimal trip fares of the two services, derive the non-WGC conditions for both services, and then compare them to those in the single market. We find that the interaction between the two services not only contributes to demand shifting effect, which adjusts fares and promotes differentiated pricing strategies, but also alters the non-WGC conditions of each service in the hybrid market, deepening their interdependence so that the waiting time of one service has a non-monotonic effect on the non-WGC regime of the alternative service. Moreover, benefiting from the coordinated complementarity of the two services with each other, passenger demand is more evenly distributed, which enhances real capacity and turnover, reduces the waiting time threshold (WTT) for each service to fall into the WGC regime under the mild condition, and contributes to travel efficiency overall. Such advantages of market diversity lay a solid foundation for ride-hailing market platforms to be able to offer more diverse service options.