We are on the Way: Analysis of On-Demand Ride-Hailing Systems

48 Pages Posted: 1 May 2017 Last revised: 15 Dec 2018

See all articles by Guiyun Feng

Guiyun Feng

University of Minnesota - Minneapolis - Industrial & System Engineering

Guangwen Kong

University of Minnesota - Twin City

Zizhuo Wang

University of Minnesota - Minneapolis - Industrial & System Engineering; The Chinese University of Hong Kong, Shenzhen

Date Written: February 28, 2017

Abstract

Recently, there has been a rapid rise of on-demand ride-hailing platforms, such as Uber and Didi, which allow passengers with smart phones to submit trip requests and match them to drivers based on their locations and drivers' availability. This increased demand has raised questions about how such a new matching mechanism will affect the efficiency of the transportation system, in particular, whether it will help reduce passengers' average waiting time compared to traditional street-hailing systems. In this talk, we shed light on this question by building a stylized model of a circular road and comparing the average waiting time of passengers under various matching mechanisms. We discover the inefficiency in the on-demand ride-hailing system when the en-route time is long, which may result in non-monotonicity of passengers' average waiting time as passenger arrival rate increases. After identifying key tradeoffs between different mechanisms, we find that the on-demand matching mechanism could result in lower efficiency than the traditional street-hailing mechanism when the system utilization level is medium and the road length is long. To overcome the disadvantage of both systems, we further propose adding response caps to the on-demand ride-hailing mechanism and develop a heuristic method to calculate a near-optimal cap. We also examine the impact of passenger abandonments, idle time strategies of taxis and traffic congestion on the performance of the ride-hailing systems. The results of this research would be instrumental for understanding the tradeoffs of the new service paradigm and thus enable policy makers to make more informed decisions when enacting regulations for this emerging service paradigm.

Keywords: on-demand ride-hailing; queueing systems; matching mechanism, congestion, idle time strategies

Suggested Citation

Feng, Guiyun and Kong, Guangwen and Wang, Zizhuo, We are on the Way: Analysis of On-Demand Ride-Hailing Systems (February 28, 2017). Available at SSRN: https://ssrn.com/abstract=2960991 or http://dx.doi.org/10.2139/ssrn.2960991

Guiyun Feng

University of Minnesota - Minneapolis - Industrial & System Engineering ( email )

111 Church Street S.E.
Minneapolis, MN 55455
United States

Guangwen Kong

University of Minnesota - Twin City ( email )

111 Church Street ST SE, Apt M
Minneapolis, MN 55455
United States

HOME PAGE: http://https://sites.google.com/site/guangwek/

Zizhuo Wang (Contact Author)

University of Minnesota - Minneapolis - Industrial & System Engineering ( email )

111 Church Street S.E.
Minneapolis, MN 55455
United States

The Chinese University of Hong Kong, Shenzhen ( email )

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