Optimal fare and fleet size regulation in a taxi/ride-sourcing market with congestion effects, emission externalities, and gasoline/electric vehicles

Abstract

There have been various approaches to tackle vehicle emissions from a road congested network in pursuit of environmental sustainability. However, it is unclear how should the government set the trip fares and fleet sizes of a market with traditional street-hail taxis and the ride-sourcing service to maximize social benefit when both congestion effects and emission externalities are considered. Moreover, there have been real-world practices to reduce emissions from taxis and ride-sourcing vehicles by controlling the numbers of gasoline vehicles and electric vehicles. On one hand, some cities (e.g., Shenzhen, London) have launched a taxi replacement project that replaces all fossil-fueled taxis with electric taxis. On the other hand, the regulation preventing gasoline vehicles from being registered as ride-sourcing vehicles can also be observed. It remains a question of how should the social optimal fares and fleet sizes in a market with electric taxis and ride-sourcing vehicles be different from those in the market with gasoline vehicles. To address the above questions, this study investigates the optimal trip fare and fleet size regulation in an aggregate taxi/ride-sourcing market with congestion effects and environmental externalities. Two market scenarios are investigated, in which all taxis/ride-sourcing vehicles are gasoline vehicles or electric vehicles. We develop two social benefit maximization models and duopoly profit-maximization models, and derive the corresponding optimality conditions. Analytical and numerical results are given to gain insights into the regulation of taxi/ride-sourcing markets.