On the Supply of Autonomous Vehicles in Platforms

64 Pages Posted: 9 Aug 2022 Last revised: 23 Feb 2024

See all articles by Daniel Freund

Daniel Freund

MIT Sloan School of Management

Ilan Lobel

New York University (NYU)

Jiayu (Kamessi) Zhao

Operations Research Center, MIT

Date Written: August 1, 2022

Abstract

The likely large-scale deployment of autonomous vehicle (AV) technology in the near future has the potential to fundamentally change the transportation landscape. Due to the high cost of AV hardware, the most likely path to widespread AV use is via platforms that can sustain high utilization, such as ride-hailing and delivery services. In this paper we consider four potential operational models to commercialize AVs, which we model as a supply chain game between a platform, an AV supplier, and human drivers that join as individual contractors (ICs). Our operational models include (1) an open platform that outsources the high capital burden of AVs by allowing the AV supplier and human drivers to bring their own vehicles into the system, (2) an AV-only platform that is operated independently by the AV supplier, (3) a platform that sources AVs from the supplier through leasing contracts, and (4) an integrated supply chain in which the same entity operates the platform and supplies the AVs. We use the integrated supply chain as a benchmark to measure the performances of the other models. We find that apart from the AV-only platform, all deployment models are subject to a risk of AV underutilization due to the need to maintain the ICs' utilization sufficiently high to ensure ICs remain engaged. In the non-integrated models, this risk can propagate backwards in the supply chain and thereby negatively affect its efficiency. For the open platform the efficiency loss compared to an integrated platform can be unbounded. We then study how usage commitments between the platform and the supplier can overcome the unbounded efficiency loss. Though the uncontracted open platform may perform worse than the other models, an open platform equipped with a usage contract offers substantial efficiency benefits compared to the AV-only/AV leasing platforms.

Keywords: Supply Chain Contracting, Ride-hailing, Ridesharing, Autonomous Vehicles, Gig Economy, Sharing Economy

Suggested Citation

Freund, Daniel and Lobel, Ilan and Zhao, Jiayu, On the Supply of Autonomous Vehicles in Platforms (August 1, 2022). Available at SSRN: https://ssrn.com/abstract=4178508 or http://dx.doi.org/10.2139/ssrn.4178508

Daniel Freund (Contact Author)

MIT Sloan School of Management ( email )

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Ilan Lobel

New York University (NYU) ( email )

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Jiayu Zhao

Operations Research Center, MIT ( email )

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3133354077 (Phone)

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