Equilibrium queueing analysis in a ride-hailing service with sharing option

Abstract

This paper examines different car-sharing models offered by ride-hailing firms. In the traditional model, customers are served individually. In the sharing-only model, all customers are willing to share the ride with other customers. In the hybrid model, customers may choose either individual or shared service provided by the same fleet. Sharing customers incur a hassle cost. We develop a queueing game-theoretic model to (i) determine the arrival rates that maximizes social welfare and (ii) choose admission fees that maximizes firm profits. First, we discover a tipping point in the hybrid model. When hassle cost decreases to this point, (i) the optimal customer behavior immediately switches from less than 80% sharing customers to 100%, (ii) the optimal arrival rate increases dramatically, and (iii) the rate at which a decreasing hassle cost improves the maximum social welfare significantly increases. Second, when hassle cost is higher than the tipping point, the hybrid model may generate higher social welfare than the other two models. Hence, the firm can improve social welfare by assigning customers to differentiated services even when they are not heterogeneous. Finally, we propose a profit-maximizing admission fee structure in the hybrid model to maximize firm profits and demonstrate its effectiveness.