Optimal Design of Solo and Pool Services for On-Demand Ride-hailing

26 Pages Posted: 8 Jul 2021

See all articles by Sina Bahrami

Sina Bahrami

Eindhoven University of Technology

Mehdi Nourinejad

York University; Department of Civil Engineering

Mahmood Mahmoodi Nesheli

University of Toronto

Yafeng Yin

University of Michigan, Ann Arbor

Date Written: June 25, 2021

Abstract

On-demand ride-hailing services are becoming a ubiquitous means of mobility in major cities. While convenient and accessible, they are costly for many, and thus ride-hailing providers are often offering pooling options that allow passengers to share a ride and split the fare. The downside of pooling is the extra waiting time passengers may experience as drivers make detours to find and board additional passengers. This paper assesses the competitive advantage of solo (single occupancy) and pool services and investigates the potential benefits of offering both. We characterize the search friction using bilateral meeting functions and present a closed queuing system to capture the pooling effects. We then derive the optimal fare, vehicle occupancy and fleet size for solo and pool services. In symmetric-elasticity meeting functions, we analytically show that (i) the pool service is profitable only when there is increasing returns-to-scale in matching, (ii) the solo service is profitable when the marginal fleet acquisition cost is low, and (iii) the provider should offer both solo and pool services only when there is decreasing returns-to-scale in matching. These observations are further validated numerically for more general cases.

Keywords: Ride-hailing; pooling; bilateral meeting; closed-queue systems

Suggested Citation

Bahrami, Sina and Nourinejad, Mehdi and Mahmoodi Nesheli, Mahmood and Yin, Yafeng, Optimal Design of Solo and Pool Services for On-Demand Ride-hailing (June 25, 2021). Available at SSRN: https://ssrn.com/abstract=3874190 or http://dx.doi.org/10.2139/ssrn.3874190

Sina Bahrami (Contact Author)

Eindhoven University of Technology ( email )

Department of Built Environment
Eindhoven, 5612 AZ
Netherlands

Mehdi Nourinejad

York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Department of Civil Engineering ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Mahmood Mahmoodi Nesheli

University of Toronto ( email )

Toronto, Ontario M5S 3G8
Canada

Yafeng Yin

University of Michigan, Ann Arbor ( email )

2350
Hayward Street
Ann Arbor, MI 48109
United States

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