Pricing Shared Rides

62 Pages Posted: 27 Aug 2023 Last revised: 14 Nov 2024

See all articles by Chiwei Yan

Chiwei Yan

University of California, Berkeley

Julia Yan

University of British Columbia (UBC) - Sauder School of Business

Yifan Shen

University of Washington

Date Written: August 24, 2023

Abstract

Shared rides, which pool individual riders into a single vehicle, are essential for mitigating congestion and promoting more sustainable urban transportation. However, major ridesharing platforms have long struggled to maintain a healthy and profitable shared rides product. To understand why shared rides have struggled, we analyze procedures commonly used in practice to set static prices for shared rides, and discuss their pitfalls. We then propose a pricing policy that is adaptive to matching outcomes, dubbed match-based pricing, which varies prices depending on whether a rider is dispatched alone or to what extent she is matched with another rider. Analysis on a single origin-destination setting reveals that match-based pricing is both profit-maximizing and altruistic, simultaneously improving cost efficiency (i.e., the fraction of cost saved by shared rides relative to individual rides) and reducing rider payments relative to the optimal static pricing policy. These theoretical results are validated on a large-scale simulation with hundreds of origin-destinations from Chicago ridesharing data. The improvements in efficiency and reductions in payments are especially noticeable when costs are high and demand density is low, enabling healthy operations where they have historically been most challenging.

Keywords: Shared Rides, Sustainability

Suggested Citation

Yan, Chiwei and Yan, Julia and Shen, Yifan, Pricing Shared Rides (August 24, 2023). Available at SSRN: https://ssrn.com/abstract=4551405 or http://dx.doi.org/10.2139/ssrn.4551405

Chiwei Yan (Contact Author)

University of California, Berkeley ( email )

4141 Etcheverry Hall
Berkeley, CA 94720-1777
United States

Julia Yan

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Yifan Shen

University of Washington ( email )

United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
310
Abstract Views
2,877
Rank
202,554
PlumX Metrics