Surge pricing and labor supply in the ride-sourcing market. (November 2018)

• Record Type: Journal Article
• Authors: Zha, Liteng; Yin, Yafeng; Du, Yuchuan
• Is Part Of: Transportation research. Volume 117(2018)Part B
• Page Start: 708
• Page End: 722
• Publication Date: 2018-11
• Subjects: Ride-sourcing -- Labor supply -- Surge pricing -- Work schedule -- Time-Expanded Network; Transportation -- Research -- Periodicals; Transportation -- Mathematical models -- Periodicals
• DOI: 10.1016/j.trb.2017.09.010
• Languages: English
• ISSNs: 0191-2615

Abstract

Highlights: Ride-sourcing drivers enjoy flexibility in deciding their work schedules. This paper models the effect of surge pricing on drivers' work scheduling. Equilibrium models are formulated based on two hypotheses of labor supply. The effect of surge pricing is investigated using a bi-level programming framework. A simple regulation scheme to reduce market power is discussed. Abstract: This study proposes equilibrium models under different behavioral assumptions of labor supply in a ride-sourcing market and then investigates the performance of surge pricing. A time-expanded network is first proposed to delineate possible work schedules of drivers. Based on the proposed network, we provide formulations and algorithms for both neoclassical and income-targeting hypotheses to characterize the labor supply of ride-sourcing drivers, i.e., their choices of work hours. We then investigate the impact of surge pricing using a bi-level programming framework, with the lower-level problem capturing the equilibrium work hour choices while the upper-level one representing revenue-maximizing surge pricing. Compared to static pricing, the platform and drivers are found to generally enjoy higher revenue while customers may be made worse off during highly surged periods. Lastly, a simple regulation scheme to reduce market power is discussed.