Why are Fairness Concerns so Important? Lessons from a Shared Last-Mile Transportation System

33 Pages Posted: 30 Apr 2018 Last revised: 26 Dec 2019

See all articles by Yiwei Chen

Yiwei Chen

University of Cincinnati - Lindner College of Business

Hai Wang

Carnegie Mellon University - Heinz College of Information Systems and Public Policy; Singapore Management University - School of Information Systems

Date Written: April 25, 2018

Abstract

The Last-Mile Problem refers to the provision of travel service for passengers from the nearest public transportation node to the final destination. The Last-Mile Transportation System (LMTS), which has recently emerged, provides on-demand shared last-mile transportation service for passengers. We consider an LMTS that consists of two types of passengers, regular-type passengers and special-type passengers (e.g., seniors, disabled people). The valuation of the last-mile service for special-type passengers is statistically higher than the one for regular-type passengers. Passengers incur disutility from waiting for the last-mile service. In this paper, we explore two fairness guarantees on special-type passengers: (1) the fare for special-type passengers is restricted to be no higher than a given fraction of the fare for regular-type passengers; (2) special-type passengers cannot be served after regular-type passengers. We aim at understanding the role of these two fairness constraints on the LMTS operator's pricing and service priority policies, with the objective of maximizing either profit or social welfare. Our theoretical analysis and numerical experiments using real public transport data show that if passenger waiting disutility is negatively correlated with the last-mile service valuation, i.e., regular-type passengers are more sensitive to waiting time, then with both objectives, the LMTS operator always has incentive to charge special-type passengers no less than regular-type passengers and serve special-type passengers after regular-type passengers. This entails the necessity of enforcing the two fairness guarantees. In addition, even if passenger waiting disutility is positively correlated with the last-mile service valuation, i.e., special-type passengers are more sensitive to waiting time, the two fairness guarantees are still necessary under some market environments. These findings demonstrate the importance of fairness concerns in shared transportation systems.

Keywords: Shared Transportation, Last-Mile, Fairness, Price Discount, Service Priority

Suggested Citation

Chen, Yiwei and Wang, Hai, Why are Fairness Concerns so Important? Lessons from a Shared Last-Mile Transportation System (April 25, 2018). Available at SSRN: https://ssrn.com/abstract=3168324 or http://dx.doi.org/10.2139/ssrn.3168324

Yiwei Chen

University of Cincinnati - Lindner College of Business ( email )

P.O. Box 210195
Cincinnati, OH 45221-0195
United States

Hai Wang (Contact Author)

Carnegie Mellon University - Heinz College of Information Systems and Public Policy ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Singapore Management University - School of Information Systems ( email )

School of Information Systems
80 Stamford Road
Singapore 178902, 178899
Singapore

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