Geometric matching and spatial pricing in ride-sourcing markets |
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Institution: | 1. School of Information Systems, Singapore Management University, 80 Stamford Road, Singapore;2. Heinz College of Information Systems and Public Policy, Carnegie Mellon University, Pittsburgh, Pennsylvania, USA;3. Department of Civil and Environmental Engineering, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong, China;1. Department of Civil and Coastal Engineering, University of Florida, 365 Weil Hall, Gainesville, FL 32611-6580, United States;2. Department of Civil and Enviromental Engineering, University of Michigan, 2350 Hayward Street, Ann Arbor, MI 48109-2125, United States;3. School of Transportation Engineering, Tongji University, Shanghai, 201804, China;1. Department of Civil and Enviromental Engineering, University of Michigan, 2350 Hayward Street, Ann Arbor, MI 48109-2125, United States;2. Department of Civil and Coastal Engineering, University of Florida, 365 Weil Hall, Gainesville, FL 32611-6580, United States |
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Abstract: | This paper develops a model to investigate the effects of spatial pricing on ride-sourcing markets. The model is built upon a discrete time geometric matching framework that matches customers with drivers nearby. We demonstrate that a customer may be matched to a distant vehicle when demand surges, yielding an inefficient supply state. We further investigate market equilibrium under spatial pricing assuming a revenue maximizing platform, and find that the platform may resort to relatively higher price to avoid the inefficient supply state if spatial price differentiation is not allowed. Although spatial pricing facilitates market clearing, the platform may still set price more than the efficient level, which compromises the public interest. We then propose a commission rate cap regulation that reaps the flexibility of spatial pricing and can achieve the second best under some homogeneity assumptions. |
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Keywords: | Ride sourcing Spatial pricing Geometric matching Spatial equilibrium and regulation |
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