Reducing Traffic Incidents in Meal Deliveries: Penalize the Platform or its Independent Drivers?

67 Pages Posted: 29 Sep 2022 Last revised: 20 Jun 2024

See all articles by Wenchang Zhang

Wenchang Zhang

Indiana University, Kelley School of Business

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area

Liu Ming

The Chinese University of Hong Kong, Shenzhen

Yue Cheng

HSBC Business School, Peking University

Date Written: September 28, 2022

Abstract

To curb meal-delivery-related traffic incidents, some governments have imposed a harsher traffic penalty on meal-delivery drivers. Despite these attempts, the number of meal-delivery-related traffic violations and accidents has not abated. These observations piqued our interest in examining two questions: Under a given penalty scheme, how should a profit-maximizing platform determine the delivery fee to charge its customers and the commission to pay its drivers? How should a welfare-maximizing government determine its penalty scheme to curb traffic incidents and improve public safety? Methodology/Results: Our analysis of a three-stage Stackelberg game yields three key results. First, imposing a higher incident penalty on drivers proves ineffective. It will push the platform to offer higher commissions to incentivize drivers to travel faster, resulting in more accidents and lower profit for the platform. Second, imposing a higher incident penalty on the platform will encourage it to lower commissions, which will induce drivers to travel at safer speeds. Third, penalizing only the platform (and not the drivers) is a socially optimal policy. This result continues to hold when we relax different modeling assumptions separately. We then illustrate our findings using data collected from a Chinese meal-delivery platform. Managerial Implications: Governments should transition from penalizing individual drivers to penalizing platforms. This shift recognizes the platforms' central role in setting the conditions under which drivers operate. Also, this shift in policy would pressure platforms to develop incentives that reward drivers for safe driving instead of fast deliveries.

Keywords: Meal-delivery platforms, penalty system, public safety, traffic violations, accidents

Suggested Citation

Zhang, Wenchang and Tang, Christopher S. and Ming, Liu and Cheng, Yue, Reducing Traffic Incidents in Meal Deliveries: Penalize the Platform or its Independent Drivers? (September 28, 2022). Kelley School of Business Research Paper No. 2022-09, Available at SSRN: https://ssrn.com/abstract=4231746

Wenchang Zhang (Contact Author)

Indiana University, Kelley School of Business ( email )

Business 670
1309 E. Tenth Street
Bloomington, IN 47401
United States

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

Christopher S. Tang

University of California, Los Angeles (UCLA) - Decisions, Operations, and Technology Management (DOTM) Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/x980.xml

Liu Ming

The Chinese University of Hong Kong, Shenzhen ( email )

Shenzhen, Guangdong 518172
China

Yue Cheng

HSBC Business School, Peking University

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