On the benefits of ex-post pricing for ride-pooling

Abstract

Today’s digital ride-hailing systems experienced significant growth. In this context, ride-pooling promises more sustainable on-demand transportation by allowing customers with similar transportation requests to share a ride and, accordingly, a more efficient use of resources. In practice, mobility service providers that allow for ride-pooling offer customers an ex-ante fixed price regardless of whether the customers eventually share their rides. This can lead to lost profits for providers or to customers only participating in pooling because they gamble on a cheaper solitary ride, while an eventual pooling might decrease their utility. We study the implementation of an ex-post pricing (EPP) scheme for ride-pooling that accounts for individual customers’ pooling benefits. Within this mechanism, customers receive a maximum price-to-pay information up-front, which may decrease in the event of a profitable pooling. We study the benefit of this mechanism from a customer, fleet operator, and system perspective, and compare it to the existing ex-ante pricing (EAP) mechanism. We prove that it is individually rational and weakly dominant for a customer to participate in a pooling service with EPP, but not for a mechanism with EAP. We substantiate this analysis with complementary numerical studies, implementing a simulation environment based on real-world data that allows us to assess both mechanisms’ benefits. Our results allow to analyze the difference between EAP and EPP pricing from a holistic perspective, and thus to provide decision support for mobility service operators. We analyze in which cases an EPP mechanism Pareto dominates an EAP mechanism and show that an EPP mechanism is preferable from a mobility service provider perspective. Moreover, we show that EPP mechanisms can lead to a win-win situation for operators and customers while improving system performance and reducing emissions up to 32% compared to not pooling customers.