Drivers, Riders and Service Providers: The Impact of the Sharing Economy on Mobility

84 Pages Posted: 14 Sep 2017 Last revised: 22 Jun 2020

See all articles by Saif Benjaafar

Saif Benjaafar

University of Minnesota - Minneapolis - Industrial & System Engineering

Harald Bernhard

Singapore University of Technology and Design (SUTD)

Costas Courcoubetis

Singapore University of Technology and Design (SUTD)

Date Written: September 11, 2017

Abstract

It is widely believed that ride sharing, the practice of sharing a car such that more than one person travels in the car during a journey, has the potential to significantly reduce traffic by filling up cars more efficiently. We introduce a model in which individuals may share rides for a certain fee, paid by the rider(s) to the driver through a ride sharing platform. %Collective decision making is modeled as an anonymous non-atomic game with a finite set of strategies and payoff functions among individuals who are heterogeneous in their income. We examine how ride sharing is organized and how traffic and ownership are affected if a platform, which chooses the seat rental price to maximize either revenue or welfare, is introduced to a population. We find that the ratio of ownership to usage costs determines how ride sharing is organized. If this ratio is low, ride sharing is offered as a peer-to-peer (P2P) service, and if this ratio is high, ride sharing is offered as a business-to-customer (B2C) service. In the P2P case, rides are initiated by drivers only when the drivers need to fulfill their own transportation requirements. In the B2C case, cars are driven all the time by full time drivers taking rides even if these are not motivated by their private needs. We show that, although the introduction of ride sharing may reduce car ownership, it can lead to an increase in traffic. We also show that traffic and ownership may increase as the ownership cost increases and that a revenue maximizing platform might prefer a situation where cars are driven with only a few seats occupied, causing high traffic. We contrast these results with those obtained for a social welfare-maximizing platform.

Keywords: ride sharing, sharing economy, transportation, equilibrium analysis, non-atomic games, social welfare

Suggested Citation

Benjaafar, Saif and Bernhard, Harald and Courcoubetis, Costas, Drivers, Riders and Service Providers: The Impact of the Sharing Economy on Mobility (September 11, 2017). Available at SSRN: https://ssrn.com/abstract=3035478 or http://dx.doi.org/10.2139/ssrn.3035478

Saif Benjaafar

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

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

Harald Bernhard (Contact Author)

Singapore University of Technology and Design (SUTD) ( email )

20 Dover Drive
Singapore, 138682
Singapore

Costas Courcoubetis

Singapore University of Technology and Design (SUTD) ( email )

20 Dover Drive
Singapore, 138682
Singapore

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