Private vs. Pooled Transportation: Customer Preference and Congestion Management

60 Pages Posted: 29 Sep 2020

See all articles by Kashish Arora

Kashish Arora

Cornell University

Fanyin Zheng

Columbia University - Columbia Business School

Karan Girotra

Cornell Tech; Cornell SC Johnson College of Business

Date Written: September 28, 2020

Abstract

Large cities around the globe are facing an alarming growth in traffic congestion, to which a significant contributor are the private cabs operated by ride-hailing platforms. Pooled transportation options such as shuttle services are cheaper and greener alternatives but are still new to many customers and policy makers. In this work, we build a structural model to study customers' preferences on prices and service features when choosing between private taxis and a scheduled shuttle service. Using the estimated model, we evaluate the efficacy of congestion surcharge policies in reducing congestion on the road. We find that a 20% congestion surcharge leads to 4% of customers switching from the cab to the shuttle service. We show that providing a 20% discount on shuttle rides achieves one-fourth of this effect. We also compare the efficacy of these policies with policies that reduce inconveniences associated with the shuttle service. We find that a 20% decrease in the walking inconvenience can achieve 35% of the total number of customers substituting from cabs to shuttles achieved as compared to the congestion surcharges. Our findings suggest that, by changing operations levers such as pooled service features, cities can achieve a substantial amount of the benefit from reducing congestion, without sacrificing customer welfare, compared with congestion surcharge policies. Moreover, as the majority of the effect comes from new users of the shuttle service, our finding highlights the importance of incorporating customer preference heterogeneity in designing effective policies to manage congestion.

Keywords: Empirical Operations Management, Ride-hailing Services, Congestion Management, Choice Model, Structural Estimation, Machine Learning

JEL Classification: M1, R4, Y1

Suggested Citation

Arora, Kashish and Zheng, Fanyin and Girotra, Karan, Private vs. Pooled Transportation: Customer Preference and Congestion Management (September 28, 2020). Available at SSRN: https://ssrn.com/abstract=3701056 or http://dx.doi.org/10.2139/ssrn.3701056

Kashish Arora (Contact Author)

Cornell University ( email )

Sage Hall
114 East Ave
Ithaca, NY 14850
United States

Fanyin Zheng

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

HOME PAGE: http://www.fanyinzheng.com

Karan Girotra

Cornell Tech ( email )

111 8th Avenue #302
New York, NY 10011
United States

HOME PAGE: http://www.girotra.com

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

HOME PAGE: http://www.girotra.com

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