Becoming a freelancer or contractor? Drivers’ contractual mode and schedule decisions in a dual sourcing market

Abstract

In the ride-hailing market, the platforms could recruit contractors subject to prescriptive schedules to reduce the labor supply uncertainty and balance the demand and supply, and the drivers are entitled to become a freelancer or a contractor and choose the schedule they would like to provide the service. This paper proposes an analytical framework to capture the drivers’ decisions of becoming a freelancer and contractor as well as how to arrange their work schedules in a dual sourcing market. The utility structures for two kinds of drivers, freelancers and contractors, are defined and a time-expanded network is adopted to portray the drivers’ work schedule choices. With this setting, the drivers’ simultaneous contractual mode and work schedule selection model is formulated and the algorithm is designed. The numerical examples are conducted to investigate the characteristics of the equilibrium solutions. The results show that a dual-sourcing market is always advantageous to contractors and conditionally beneficial to the platform, freelancers and customers. When there is low potential demand, higher fixed salary is preferred for the platform to attract contractor and complement the labor supply. When the market is thriving, the effect of the profits’ increment by dual-sourcing is not obvious. This work could provide new insights on how to manage a dual-sourcing market for the platform.