Optimal business model for the monopolistic ride-hailing platform: Pooling, premier, or hybrid?

Abstract

Pooling, premier, and hybrid are three business models employed by ride-hailing platforms. We establish an analytical framework to examine these three models for addressing the platform’s optimal business decision. Our results reveal that both the time-sensitive cost of heterogeneous passengers and the operating cost of the platform’s self-operating vehicles play critical roles in the platform’s choice of optimal model. If the operating cost of the platform’s self-operating vehicles is relatively high, the platform should choose the pooling service model when passengers have a low ratio of time-sensitive cost between using the pooling service and using the premier service. The premier service model should be implemented if this ratio is in the middle range and the operating cost is sufficiently low. Otherwise, the hybrid service model is optimal. We characterize the conditions under which the pooling service model and the premier service model can achieve Pareto improvement for the platform and passengers. Furthermore, if the ratio is in the middle range, the pooling service model is more beneficial for passengers, while the premier service model is more profitable for the platform.