Geometric Matching and Spatial Pricing in Ride-Sourcing Markets

32 Pages Posted: 18 Dec 2017 Last revised: 11 May 2018

See all articles by Liteng Zha

Liteng Zha

University of Florida

Yafeng Yin

University of Michigan, Ann Arbor

Zhengtian Xu

George Washington University - Department of Civil and Environmental Engineering

Date Written: December 18, 2017

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.

Keywords: ride sourcing, spatial pricing, geometric matching, spatial equilibrium, regulation

JEL Classification: D40, D42, L50, L91, R40

Suggested Citation

Zha, Liteng and Yin, Yafeng and Xu, Zhengtian, Geometric Matching and Spatial Pricing in Ride-Sourcing Markets (December 18, 2017). Available at SSRN: https://ssrn.com/abstract=3089568 or http://dx.doi.org/10.2139/ssrn.3089568

Liteng Zha (Contact Author)

University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

Yafeng Yin

University of Michigan, Ann Arbor ( email )

2350
Hayward Street
Ann Arbor, MI 48109
United States

Zhengtian Xu

George Washington University - Department of Civil and Environmental Engineering ( email )

800 22nd Street NW
Washington, DC 200052
United States

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