An incentive strategy for the retention of impatient passengers in ride-sourcing markets

Abstract

A prominent problem plagued the ride-sourcing service providers is the instantaneous real-time demand–supply imbalance. This entails a terrible user experience and causes adverse sustainable results such as customer churn for the platform, which will damage both drivers’ income and the platform revenue. To reduce passenger cancellation caused by extended wait times, we propose an incentive-based queue management strategy —a discount method— to enhance the waiting experience and encourage passengers to stay in a post-peak period . We formulate the waiting process for a ride-sourcing service as an M/M/c+M queue system with impatient passengers, and model passengers’ reneging behaviors by characterizing the impact of discounted trip fare and updated queue information on their travel utilities. Based on such a behavior model, we can analyze the effect of the discount strategy on the queueing process, which allows us to maximize the platform’s profit growth by tailoring the discount strategy. Our result shows that the discount strategy can effectively increase the platform’s profit. Under the specific condition of the discount strategy, the earlier the strategy is implemented in the post-peak period, the higher platform profit can be achieved. Moreover, we explore the impact of queueing system parameters on the performance of the discount strategy and gain some interesting insights.