Competition in Ride-Hailing Markets

30 Pages Posted: 9 Oct 2019 Last revised: 24 Feb 2020

See all articles by Amirmahdi Ahmadinejad

Amirmahdi Ahmadinejad

Stanford University

Hamid Nazerzadeh

University of Southern California - Marshall School of Business

Amin Saberi

Stanford University - Management Science & Engineering

Nolan Skochdopole

Institute for Computational & Mathematical Engineering

Kane Sweeney

Uber Technologies Inc.

Date Written: September 29, 2019

Abstract

We present a model for competition between ride-hailing platforms. Riders choose a platform to maximize their utility which is decreasing in price and waiting time. Drivers can accept ride requests from both platforms. Platforms compete via prices over riders and drivers. We investigate whether competition leads to market failure in the form of the ``tragedy of the commons'' as platforms deplete the shared resource of open cars. Our theoretical analysis shows that in all equilibria, riders and drivers will use both platforms and prices will be equal; market failure is a possibility, but under certain conditions, the possibility of rapid deterioration of market throughput deters the platforms from undercutting each other's prices and gives rise to high-throughput equilibria. This result is also supported by numerical analysis, using parameters estimated from Uber data, and simulations. We observe that if riders are not very sensitive to waiting times, the loss of efficiency due to competition could be small.

Suggested Citation

Ahmadinejad, Amirmahdi and Nazerzadeh, Hamid and Saberi, Amin and Skochdopole, Nolan and Sweeney, Kane, Competition in Ride-Hailing Markets (September 29, 2019). Available at SSRN: https://ssrn.com/abstract=3461119 or http://dx.doi.org/10.2139/ssrn.3461119

Amirmahdi Ahmadinejad

Stanford University ( email )

Stanford, CA 94305
United States

Hamid Nazerzadeh (Contact Author)

University of Southern California - Marshall School of Business ( email )

Bridge Memorial Hall
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~nazerzad/

Amin Saberi

Stanford University - Management Science & Engineering ( email )

473 Via Ortega
Stanford, CA 94305-9025
United States

Nolan Skochdopole

Institute for Computational & Mathematical Engineering ( email )

Stanford, CA 94305
United States

Kane Sweeney

Uber Technologies Inc. ( email )

1455 Market St
San Francisco, CA 94103-1331
United States

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